Beer and pub trade bodies slam ‘collective failure of insurers’ during Covid-19 crisis

A collective of trade associations within the beer and pub industry has penned an open to letter to ABI chairman Jon Dye, also the chief executive at Allianz, urging insurer senior executives to collaborate with the pub sector on a solution for rejected business interruption (BI) claims related to the coronavirus lockdown measures.

The One Voice Group includes the British Beer and Pub Association (BBPA), UK Hospitality, British Institute of Innkeeping (BII) and the Society of Independent Brewers – these trade bodies represent 50,000 pub businesses and 2,000 brewers in the UK.

One Voice Group chairman Stephen Gould stated in his letter that although the pub sector has come together to present a united voice to government in tackling the detrimental financial impacts of the Covid-19 lockdown, “there has been one notable omission - insurance companies”.

He continued: “We had hoped insurers would work with us at this critical time. With one or two exceptions, the collective failure of insurers to step up and meet their obligations has been deeply disappointing.”

Rejected claims

Gould added that UK pubs holding business interruption insurance policies expected to receive pay outs when they were forced to close in line with government advice surrounding the Covid-19 pandemic.

However, member research conducted by the trade associations showed that the opposite was, in fact, true – Gould labelled this “unacceptable” and “deplorable”.

“The vast majority of our pub sector businesses have taken a policy including business interruption, with a clear expectation that a material disruption to their business through events beyond their control would be covered,” Gould wrote.

“Industry survey data has found that only 1% of hospitality businesses, 3% of BII members, and 4% of BBPA member companies have received a positive response from their insurer.

“In normal circumstances this would be unacceptable, in this crisis it is frankly deplorable and threatens business survival for thousands of pub businesses.”

One Voice Group is calling on insurer senior executives to meet with the collective in order to “discuss and lead a constructive way forward”. The group is already lobbying government for “a comprehensive package of measures to sustain our sector, protect jobs and livelihoods and safeguard our great British pubs”.

Gould added: “With additional lockdown measures planned for our sector and further material disruption to our businesses likely, the compensation owed to our pub, brewery and broader hospitality businesses has become an even more urgent matter.”

ABI response

This week, ABI director general Huw Evans responded to One Voice Group’s missive, which was originally sent to the insurance trade association on 7 May.

Although acknowledging that “this is a difficult and uncertain time for many businesses”, Evans clarified that the Covid-19 pandemic is not a standard risk that would be covered within a BI policy.

He said: “Businesses are typically protected against day to day risks such as damage to premises from fire or flood, motor accidents, supplier failure and employee harm. Last year, in the UK alone, these types of everyday claims from businesses amounted to £7.8bn.

“Business interruption cover is typically built around something specific happening to the physical premises, not something to the whole country.

“Where extensions have been purchased for notifiable diseases, these are typically for a specific set of diseases and require the disease to have infected the premises concerned.

”These extensions provide protection to businesses in the hospitality sector when, for example, an employee contracts a norovirus or returns from holiday with malaria, thereby requiring the business to be closed for deep cleaning with the costs and loss of earnings covered by the insurance. Such policies are not designed to cover a global viral pandemic of a kind we have not seen in over 100 years in this country and nor were your members charged for such cover.”

Insolvency risks

Evans goes on to explain that to make payments outside of policy terms would pose insolvency issues for insurers.

“I can, of course, appreciate the desire to see insurers make compensation payments outside of policy terms, especially given the very difficult situation facing the hospitality sector,” he wrote.

“However, the scale of the problem would see the cost of such payments easily run into billions of pounds for which the insurance industry has not collected premiums or reserved.

“Such goodwill gestures could therefore only be delivered at risk to insurer solvency and require insurance executives to breach their legal and regulatory responsibilities to do nothing that will endanger the financial safety of the company.

“Where businesses are covered, insurers have publicly committed to deal with claims as swiftly as possible.

“Our latest estimate, informed by data from our members to support our response to questions from the Treasury Select Committee, is that £900m will be paid by insurers to businesses for interruption as a result of the Covid-19 crisis as part of an estimated £1.7bn insurance pay outs in the UK from ABI members and Lloyd’s of London. Any of your members who are unsure whether they have cover or not should seek clarification with their insurer or adviser.”

Evan’s letter does not mention the proposed meeting suggested by One Voice Group.