Chief executive adds that the insurer has seen 3,000 new business interruption claims following the Supreme Court’s judgment in January
Allianz Insurance has been forced to pay out for coronavirus-related business interruption (BI) claims due to broker wordings, said Jon Dye, chief executive of Allianz Holdings.
Speaking to trade press following the publication of Allianz Holdings’s 2020 full year financial results, he said: “The only area where there is cover [for Covid-19-linked BI claims] are on broker wordings.
“It’s about 2.5% of our total business interruption sums insured where there are extensions for notifiable diseases or specified illnesses or other forms of denial of access cover where there might be some cover, so it’s a very small subset of the total business interruption book.”
He added that “all of the Allianz standard products have this clearly excluded”.
To prevent potential coverage discrepancies like this happening again, Dye said the solution lies in underwriting.
He continued: “The industry as a whole didn’t have this risk front of mind [18 months ago]. I don’t think the world as a whole had this risk front of mind and hence all of a sudden, we’re applying a bunch of wordings to a situation which they were never designed to respond to. We’ve found a lot of complexity in there.
“It does ask us some questions about how do we look at the broker wordings that are presented and how do we make sure they are transparent and accurate because our own wordings actually were transparent and accurate.”
Claims uptick
Following the Supreme Court’s final ruling in January this year, Dye told journalists Allianz Insurance has received 3,000 additional claims – however, only 100 of these will have cover, he added.
Describing the claims increase in the wake of the Supreme Court judgment as “very significant”, Dye explained: “That’s simply because the press reporting was [around] ‘a massive boost for small business’ and of course, lots of small business customers thought that this was a moment, therefore, to come forward with a claim and the vast majority of them don’t have any cover. The important thing for us is to clearly explain to people why the cover isn’t there.”
Despite this, Dye added that Allianz Insurance was not “much affected by the Supreme Court” decision, as it “probably only had about 200 claims that were impacted by that”. Dye said the firm was currently working through these claims, gathering information from broker partners.
A responsible approach
Speaking more broadly on how the insurer reacted to BI claims linked to the pandemic, Dye said: “We have handled this entirely appropriately and indeed through a market leading and responsible approach.
“We could see that some of these claims have been covered from the outset and we have been paying them from the outset. Clearly, the first instance judgment gave further clarity.
“For us, the story of BI claims has been much more about understanding what the cover is and paying the claims from the get go. That’s really why we find ourselves already at a point where 75% of all claims have received either an interim or final payment.
“The feedback that we’ve received from brokers in particular around that has been very positive and that’s just the right thing to do as far as we’re concerned.”
Dye added that “brokers have got a key role” when it comes to the claims process here “in terms of working with their clients to make sure that the information that the insurer needs to settle the claim is available”.
“We’re working through that portfolio of claims,” he continued. “You will undoubtedly see, as you do with any sort of claim, the more straightforward, smaller cases will get settled off quickly and many of them in fact already have been.
“There will be some of the bigger ticket cases where clearly the issues are more complex and a greater deal of information is required and they will take a bit longer.”
Net of reinsurance, Dye revealed that Allianz Insurance’s exposure to BI claims is £175m – he added that the firm has paid around 1,800 interim or full payments to date, which amounts to “£40m and counting”.
This includes 78% of valid small business claims. “The other 22%, we’re busily gathering the information via brokers from the customers, to enable us to settle those as well,” he added.
“That process is running pretty smoothly and we’re handling that in the same way you would handle any other catastrophe event, which is to make sure we’re looking after our customers and getting them the financial support that they need as quickly as possible.”
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