Nearly two-thirds of businesses have had coronavirus-related BI claims rejected by insurers

Around 63% of Irish organisations have had their business interruption (BI) claim rejected by insurers, while 33% are still waiting for a final decision, according to a survey conducted by Irish representative group the Alliance for Insurance Reform (AIR).

The survey, which polled 2,095 AIR members working across the hospitality, motor and transport, leisure, retail, not-for-profit, healthcare, arts and entertainment and manufacturing sectors between 29 May and 7 June, aimed to highlight the key insurance issues linked to the current Covid-19 pandemic.

The research showed that 33% of respondents have made a BI claim – of these, only 2% have taken their claim further via the Financial Services and Pensions Ombudsman (FSPO) or legal action, and 6% are going through their insurer’s internal appeals process.

Although 40% of respondents have requested forbearance - liquidity-related concessions such as rebates, pauses or extensions – this has been declined by insurers in 18% of cases. Under a third (31%) are still awaiting a decision from their insurer on this, while for 12% of respondents, the concession is a discount on next year’s policy. AIR said this “does not address urgent liquidity issues and prevents shopping around”.

Around 16% of respondents, however, are due to receive a rebate or a refund and 8% are having their policy extended.

Peter Boland, director at AIR, said: “We cannot afford any further delays to proposed reforms in this area.

“Our members identified reductions in general damages, a more balanced duty of care, reductions in legal fees and increased sanctions for fraudulent and exaggerated claims as essential reforms in the context of Covid-19.

“It is going to take a cabinet committee, chaired by the incoming taoiseach [prime minister of the Republic of Ireland], to guarantee that the state delivers on these and other essential insurance reforms quickly, so that insurance does not hamper the recovery of the nation.”

Further impacts

The figures also showed that of the 26% of respondents who have renewed their insurance since the Covid-19 outbreak began, 22% have seen an increase in premiums.

AIR added: “In an environment where there is a substantial reduction in economic and social activity levels for all sectors and as such a massive reduction in risk and turnover, this rise in premiums is a cause for concern for all policyholders.”

More than half (55%) of respondents are also concerned about Covid-19-related personal injury claims arising in the future.

Michael Magner, chair of AIR’s Covid-19 working group and owner of Cork’s Vienna Woods Hotel said: “These figures merely confirm what we are seeing every day of the week. It is time for the state to take meaningful action before irreparable damage is done to Irish businesses and voluntary organisations struggling to deal with Covid-19.

“The Department of Finance must get insurers to play their part. The suggestion that this Covid-19 crisis may prove to be a financial armageddon for insurers is completely undermined by the relatively low level of requests for business interruption payments or forbearance.

“The Department must now prioritise the ongoing survival of SMEs and voluntary groups, which were already threatened by sky-high insurance costs and are now faced with the refusal of insurers to engage on legitimate business interruption claims and requests for immediate forbearance.

“In order to protect policyholders from Covid-19-related personal injury claims, the state must now move to indemnify businesses and voluntary groups against such claims and provide clear, detailed unambiguous guidance, customised by sector, on how to best prevent the spread of Covid-19.

“The Central Bank must equally intervene aggressively on behalf of policyholders. General statements are not enough and the Financial Ombudsman must fast-track complaints already received to give urgent clarity to policyholders on where they stand.

“Finally, insurers must vigorously contest opportunistic or exaggerated claims related to Covid-19 in order to avoid a situation where such claims become a cottage industry in their own right.”