Opportunity to boost terror insurance penetration seen amid lockdown

The UK faces a growing risk of terrorism and political violence as it emerges from lockdown, according to a recent report from the counter-terrorism police force.

It said that economic pressure gives rise to extremism, which of course can lead to terrorist incidents.

But with SME penetration of terrorism cover notoriously low at just 14%, Geo Underwriting is on a mission to educate brokers to understand the different covers available and ensure clients understand what they are purchasing.

Marcus Meredith, head of political violence and terrorism at Geo Underwriting told Insurance Times: “Extremism finds a fertile breeding place in areas where people are being forced into a way of life they are not happy with.”

It follows the suspected terrorist attack on Saturday in Reading that lead to three people being stabbed to death and three more left injured.

Potential consequences

Meredith warned of the consequences of putting people under social and economic pressure as this could lead to radicalisation and extremism taking root.

He gave the example of how lock down during the global pandemic has denied people their normal freedoms such as going to church or playing team sports – and has also reduced social interaction.

“What happens as a consequence of those changes is that people who are already feeling somewhat disenfranchised will find it easier to go online or turn to chat groups, and that’s where grooming and extremism have a really fertile breeding ground,” Meredith added.

Meredith was previously an officer in the army for five years worldwide and has over a decade experience underwriting this line of business.

Broker education

Meredith pointed out that one challenge is that people do not understand what is available when it comes to sabotage and terrorism cover.

Geo Underwriting therefore is targeting brokers.

“Most of the conversations that brokers have with clients are about the property and liability policies, and commercial combined policies. We push hard with the non-damage extensions,” he said.

Meredith believes that if brokers can speak to SMEs about how businesses are affected at the moment during the pandemic, as well as case studies of terrorist attacks that affected them, they might be able to get the point across effectively.

The firm offers non-damage denial of access and non-damage loss of attraction as standard in its policies, as well as covering businesses for the ongoing consequences they might suffer after a terrorist attack.

Prior to lockdown, Meredith spent time travelling the UK speaking to brokers about the product, holding seminars and taking part in trade fairs but this has been halted by social distancing measures.

Gap in knowledge

He added that there is still a gap in knowledge across the UK broking sector.

“If you look at the attacks that have happened in the UK, there has been a bigger effect on SME business owners than on large corporates.

”An SME is more so living hand to mouth. Part of our job is to make sure we get terrorism cover penetration up in the market as well as catering to the rest of the commercial industry,” he said.

“The cafes, restaurants and bars are more worried about footfall, so the non-damage extension is more relevant to them,” he added.

Plus, he said that these kinds of businesses are more likely to be swept up in a terror attack instead of being targeted, and Geo Underwriting covers for consequential loss.

He gave the London Bridge attack in Fish Monger’s hall last November as an example which subsequently affected businesses throughout Borough Market.

However, London Bridge has been targeted a few times, in June 2017 a terrorist used a rental van to mow down pedestrians on the bridge.

He noted that with Borough Market attack lots of insurers did not pay out as there was no damage, and the MGAs that offered non-damage cover did pay out.

This attack in 2017 closed the market for 11 days and the knock-on effect on supply chain and perishable stock not being sold, amounting in a stock loss as well as business interruption which could be long-standing as fear would deter customers.

For example, Manchester Arena had big problems selling tickets in the months that followed the attack in May 2017 which loss of attraction would cover.

Unpredictable

Although terrorism is almost completely unpredictable there are some trends.

“Attacks are usually a reaction to government policy or against western ideology.

”Given everything that is going on in the US and Europe, we are at an unprecedented moment of social and political upheaval.

”The trends point to the fact there could be increased social unrest and as a consequence increased terrorism over the next few years,” Meredith said.

Despite there being significantly less movement of people during the pandemic, “it doesn’t mean that it has stopped, it just means that it dormant and if anything the future threat could be greater than what it has been historically,” he warned.

He added that for modern day terrorists, publicity is one of the main reasons for attacks therefore places that people congregate are a target.

This differs historically with the IRA for example who targeted office blocks on weekends as they did not want to cause bodily injury but instead inflict mass damage on the economy and government policy.

Mitigating the risk

But Meredith said that there are ways that businesses can prepare themselves for this.

Firstly, he said businesses should undertake essential risk management steps which could be having security guards in place, scanning bags, CCTV and limiting the amount of people in a shop.

This can be seen in practice at sporting and music venues.

Secondly, having the right cover in place in case the worst happens, or the business is forced to close.

“That is part of the reason why we exist, to give peace of mind to those policyholders so that they are able to get back on their feet post-terrorist attack,” he added.

Policy wordings

In the UK there are two definitions of terrorism – the government defines it as “an act designed to overthrow or influence the UK government,” whereas Geo Underwriting incorporates this as well as an additional part which is “or to induce fear”.

To be considered a terrorist attack depends on whether the proximate cause is ideological.

“Our argument is because our definition is broader than what is available on government policies, it gives more peace of mind to the clients to buy the broader cover through us [as opposed to] buying cover with a narrower definition and relying on the policy wording to react,” Meredith said.

As the firm is not government backed it allows them to be more flexible with its policy wording.

Geo Underwriting is constantly looking at its data, as well as broker and customer feedback to make changes to policies and wordings.

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