POOL & SPA INDUSTRY
The Insurance Reaction To COVID-19 In this issue, Phil Bristow FCII, Director at Nsure Chartered Insurance Brokers, looks at the insurance reaction to the COVID-19 pandemic and the ongoing problems with Professional Indemnity
he insurance industry often comes in for criticism, sometimes rightly so, and was widely blamed for the lack of COVID business interruption cover during the pandemic. But was that fair? Many in the insurance industry will argue that a worldwide pandemic is simply too big a risk for mainstream insurance and should be borne by Government, as is generally the case with nuclear and war risks. It is an argument supported by numbers with the £55 billion annual claim pay-outs by UK insurers dwarfed by the cost of the Government’s bailout, currently estimated at £340 billion and rising. The Government understandably hoped that insurers would bear some of the cost, but had little understanding of insurance coverage and incorrectly thought that by making COVID a notifiable disease it would trigger widespread cover under Business Interruption policies. It did with some, but only after the recent Financial Conduct Authority test case against eight insurers found in favour of the small business policyholders. However, whilst certain sections of the media gave the impression that all policies would pay out, in reality, only a very small proportion of those with business interruption cover will receive pay-outs. The fact is that insurers affected by the ruling never intended to provide cover for national or even regional lockdowns but are now (rightly) paying the price of poorly drafted policy wordings. The infectious disease and non-damage extensions of cover that were the subject of the court case were intended to compensate a business following an event at or in the locality of their premises. They were for outbreaks of known diseases such as TB, which, although serious, could be treated, contained, and would only affect a small area. Insurers provided this cover for smaller businesses because their exposure to
losses was limited and could be quantified. Policies were not priced to cover risks with such widespread exposure as a new and potentially untreatable pandemic. Pandemic cover was available in the large corporate world where risks are individually assessed and underwritten; for example, Wimbledon reportedly received a large pay-out following cancellation of the 2020 tournament, but they were paying annual premiums of around £1m. It will come as no surprise that insurers have now reissued their business interruption wordings to completely exclude COVID, but of more concern is that many are running scared of most COVID risks. We are now seeing restrictions or exclusions with Public and Products Liability where insurers are concerned that businesses could be held liable for infections to members of the public and also restrictions on Directors and Officers policies due to the uncertainty in the economy and the risk of decisions made by directors during the pandemic coming under scrutiny in the event of a business failure. It is better news with Employers Liability where the compulsory nature of the cover (which compensates employees who are injured at work as a result of an employer’s negligence) prevents insurers from applying restrictions. Insurers are increasing Employers Liability rates because of COVID risk, although these should be modest for the wet leisure industry as opposed to higher risk sectors such as ‘care’ where an employee may be in a better position to prove they caught COVID at work, although would still need to establish that the employer was negligent.
Away from COVID, the Professional Indemnity (PI) insurance market remains difficult, especially in the construction sector, including wet leisure. A number of insurers withdrew from the market a few years ago following many years of losing money on PI, and those that remained took ‘corrective’ action by increasing premiums and restricting cover. We have now probably seen the worst of the increases, but there are still only a few insurers writing cover for wet leisure risks, and the market continues to be difficult, particularly for firms with previous claims. The cost of cover should now be a major consideration for any firm quoting for projects with long term PI commitments. That said, with over 20 years’ experience of arranging professional indemnity insurance for the wet leisure industry, Nsure has relationships with insurers who will still write wet leisure risks. However, due to some idiosyncrasies of the market, whether insurers offer terms may depend on their relationship with the broker and may not quote at all if the ‘wrong’ route to market is taken. In short, it is best to contact us early, not as a last resort. For further information on Professional Indemnity insurance, see our factsheet www. nsureinsurance.co.uk/factsheets/professionalindemnity Nsure 01903 608116 www.nsureinsurance.co.uk
Many in the insurance industry will argue that a worldwide pandemic is simply too big a risk for mainstream insurance and should be borne by Government, as is generally the case with nuclear and war risks” www.swimmingpoolnews.co.uk 31_SPN_June_21_NSure.indd 31
SPN June 2021 31 27/06/2021 13:24