Insurers are set to pay out more than £1.2 billion in claims to support people and businesses affected by Covid-19, according to an industry body.
The initial estimate, from the Association of British Insurers (ABI), covers payments for business interruption, travel insurance, weddings policies and cancelled school trips.
Of the £1.2 billion, £900 million relates to business interruption claims, a record £275 million paid to customers in cancellation claims on travel insurance, and £25 million across wedding insurance, school trips and events.
— ABI (@BritishInsurers) April 23, 2020
This is in addition to the estimated £363 million that will be paid to customers following Storms Ciara and Dennis earlier this year.
The ABI stressed that the £1.2 billion figure is an initial working estimate, forming part of a submission to the Treasury Select Committee, and is not a total figure including everything.
The figures have been put together to provide as full a picture as possible at this stage, it said.
The ABI said insurers have been managing an unprecedented level of activity in response to Covid-19, with some firms reporting a 200% rise in call volumes into their call centres.
Huw Evans, the ABI’s director general, said: “This is an unprecedented event, and insurers recognise that it is a very worrying time for everyone.
“While many business owners are uninsured for pandemics, UK insurers still expect to pay over £1.2 billion in claims, making this a significant insured event.
“From paying all valid claims, to providing a range of extra help and support to customers, insurers are working hard to reassure and support policyholders through this uncertain period.
“However, we are also painfully aware that the majority of businesses are uninsured for global pandemics, as is the case throughout continental Europe and North America.
“Although ABI members expect to pay £900 million in business interruption claims, most policyholders are not covered for pandemic losses. We agree strongly that the UK should examine public-private partnerships to find a lasting solution, to enable more affordable, more extensive pandemic insurance cover to be available to those firms who want it.”
Mel Stride, chair of the Treasury Committee, said: “The ABI has estimated that its members will pay out £900 million in business interruption claims relating to coronavirus. Yet the committee continues to receive evidence concerning the difficulties that firms are facing in making a successful claim.
“For example, UKHospitality told us that 71% of its members have had claims rejected, with only 1% having any success.
“There may be many instances where individuals and businesses believe they are covered, but in reality may not be. However, we are concerned that the insurance sector goes the extra mile in meeting claims wherever possible. For example, where there may be grey areas within policies.
“The committee echoes the expectations of the FCA: insurers should be clear and not misleading whenever they communicate and be fair and professional in how they deal with their customers.”