Most business owners hitting problems caused by the coronavirus will be wishing they had insurance to cover the impact of pandemics. Many businesses will have business interruption insurance but generally these policies require there to be “direct physical loss or damage” to trigger the claim. Some insurers, particularly in the area of risks such as terrorism, offer Non-Damage Business Interruption cover. Here, the ability to claim on the insurance doesn’t require physical damage as the trigger.
The insurance market will change
I imagine, in the current climate, many insurers will be trying to insulate themselves for business interruption, either because of the lack of physical damage or because the cause of the interruption is outside the risks that are covered. So, when this is all over, and let’s hope it’s soon, we will all wish to take out insurance that will cover us next time.
Given the expected market demand for Pandemic Insurance, it would appear to be a great market to be in. Interestingly at this point there are not many insurers offering this insurance. The primary reason appears to be the difficulties in assessing the risk and therefore pricing the policy.
Pandemics are rare
If you look at the history of pandemics in the western world, there are not many, and they are infrequent (https://en.wikipedia.org/wiki/List_of_epidemics). Even those that have occurred, may have had a significant impact on people but not the same business impact as CoronaVirus. So, is this a consequence of the disease or just our attempt to manage it?
How might it work?
Pandemic insurance is likely to require companies to mitigate their risks. Clearly if you can work from home and conduct business in a near normal way, the impact will be marginal.
Putting aside the potential terms of an insurance policy itself, insurance companies aim to contain their exposure by controlling the value of policies written in specific geographic areas to within agreed limits. Each new business quotation requires understanding the location of all the proposed insured risks (i.e. where are your company’s offices) and the calculation of the impact of providing that cover on their existing book of business. Done well, using accurate location data, not just postcodes, insurers can use all their headroom without breaking agreed limits.
If the UK looks at how insurance is written in territories where they experience bad weather events, then we will also see insurers closing to new business when threats are raised. If I want to buy hurricane insurance in Florida, just before the hurricane season, I might find it difficult or need to pay more for cover.
How does Mapcite help?
Mapcite provides software tools to help insurers manage their risk by location. It also provides location prediction software that can be used to model the movement of virus events.