PIB Group says ‘insurer exposure could mount up fast’ as vast numbers of nurseries close their doors during the Covid-19 outbreak
Last week, the government announced that schools across the UK would close in a bid to delay and prevent the spread of Covid-19.
This has filtered through to some nurseries, available for children under the age of five, also opting to shut down for safety reasons, excepting those that are remaining open to care for children of key workers, such as doctors and nurses.
The closure of these businesses presents a double-edged sword, not only affecting business owners but also the insurance sector, as insurers face increasing exposures in reaction to the coronavirus crisis.
Nick Mountifield, managing director for the schemes and affinities division at broker PIB Group, said: “There are in the region of 20,000 nurseries in the UK, so it is easy to see how exposure could mount up fast.”
Despite this escalating risk, Mountifield confirmed that there are “mitigating factors” also at play “with local authorities being asked to continue paying fees for funded early education and providers being permitted to offer places to the children to key workers”.
Mountifield continued: “This is an unprecedented situation and it will have a long-term impact on everything from premiums to the cover on offer in the future.
“There is also the question of where the line is between what private insurance must be available for and what requires wider support from national government. These are questions that will undoubtedly be considered in detail once this crisis has passed.”
Lost revenue
Typically, nurseries will purchase public liability, professional indemnity, employers’ liability, legal expenses, buildings and contents insurance; if they employ staff, the business is legally required to hold public liability and employers’ liability insurances. Nurseries may also buy insurance extensions to cover loss of revenue, personal accidents, terrorism or cyber risks, for example.
Despite this array of coverage, finding a policy that can pay out due to a coronavirus-related closure may prove more difficult that policyholders expect.
“For many nursery owners, the most important question will be whether they are covered for the loss of revenue,” Mountifield said. “Unfortunately, most loss of revenue or business interruption policies will only cover closures due to specified diseases, if at all, and the novel nature of Covid-19 means that it will not be one of these.
“Most insurance policies will not have specific exceptions for coronavirus, for the same reason they will not explicitly include it. This means that although the majority of business interruption policies will not cover this circumstance, as they usually refer to specified diseases only.
“Other covers will operate normally. For example, public liability claims resulting from Covid-19 infections on a premises would be handled in the usual way.”
Morton Michel, which is part of PIB Group, provides a NurseryCare policy that does offer coverage for closure in the current circumstances, however this is limited to £100,000 over three months.
Wider considerations
But, “loss of revenue is not the only coverage nursery owners should consider”, added Mountifield.
For example, nursery owners should think about turning to their legal expenses policies in order to access legal support – this can help with queries around legal responsibilities and obligations towards employees during these tricky times.
Furthermore, nurseries that do have to close will need to consider additional insurances, such as unoccupied property insurance, as “empty premises have their own set of risks”, Mountifield said.
The role of brokers
Mountifield confirmed that policyholders are now turning to their brokers and insurers for answers – at PIB Group, for example, call volumes have increased by approximately 4,300%.
“We are trying to find new ways to reach customers and deliver the information they need,” he said. “We know the news that we need to deliver isn’t always what people hope for, so being able to empathise with their concerns is just as important as the insurance support we provide.”
But what advice can brokers really give? Mountifield said that at PIB Group, “we have been advising all of our clients to review their business continuity plans and ensure they fully understand their obligations to their staff and customers, making use of the tools available as part of their insurance packages, such as legal advice lines.
“We are doing all we can to ensure that those who need to claim on their policies are able to do so efficiently and effectively, by putting new systems in place to handle high volumes.”
Despite this, Mountifield recognised that the insurance sector is only one aspect of this global phenomenon.
He continued: “We know that insurance can only do so much and that times like these require a national response.
“We have actively lobbied the government to increase the support package it is offering businesses at this time and we were pleased to see the government’s decision to pay 80% of peoples’ wages up to £2,500. This should go a long way to ensuring businesses are not forced to lay off staff.
“We are concerned however that the package available to self-employed people, such as childminders and children’s activity providers, is not sufficient and we have provided a templated letter for our clients to use to lobby their MPs.
“This is an unprecedented situation and one that is causing a lot of understandable anxiety.”
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