Nine News reported that we have just endured the deadliest day of the crisis yet, news.com.au quoted an expert who said that it could be “impossible to contain”, and there are currently 14 confirmed cases in Australia while the second Qantas repatriation flight returned from besieged Wuhan over the weekend. It looks as if the outbreak of coronavirus, now a global health emergency, is set to run for some time – so how will businesses, and their associated insurance, in Australia be affected by the spread of the virus?
A recently released whitepaper by Crawford, the world’s largest independent claims management company, attempted to answer exactly that. As noted in the paper, the main theme of its analysis is clear – “businesses affected by 2019-nCoV (coronavirus) are facing potentially significant costs and financial losses.”
Graham Peters, executive general adjuster at Crawford, explained to Insurance Business that the coronavirus emergency “will have a huge knock-on effect.” With a ban on Chinese nationals entering Australia, and lines of trade and movement of people severely disrupted, business from Melbourne to Darwin will be feeling the pinch. Peters gave one notable example of this fall of dominos, as he referred to the excess catchments of crayfish which are unable to be delivered to China.
“With fishermen suddenly unable to export crayfish, thousands got put back into the sea,” he said. “What must the crayfish be thinking? ‘What the hell happened – did we have an unexpected holiday?’”
This anecdote encapsulates the knock-on effect coronavirus has had on Australian business – but where does insurance come into the equation? And what problems will the virus cause for the industry?
Crawford’s whitepaper explained that the remote nature of the virus, even with its local impact, will not only cause business losses but it will also be difficult to insure those losses. In Crawford’s experience, successful claims under business interruption coverage for infection are not common. Coverage for losses due to infection and its consequences very rarely incorporates anything far removed from incidents within, or in close proximity to, the premises of the business. Martin Miller, director and global head of Crawford Forensic Accounting Services, agreed.
“General excess can sometimes cover other locations,” he said. “But generally speaking, for infectious disease cover, that infection has to occur on the premises itself to apply.”
It is for this reason, referred to by Miller as “a gap in the cover,” that businesses could sustain significant losses for events and implications far removed from their own office. This is set out in the whitepaper and will not make for comforting reading for businesses.
“Property insurance typically needs a trigger of physical loss or damage caused by an insured peril - diseases and viruses are not an insured peril,” the paper reads. And contingent extensions such as denial of access or loss of attraction under such policies still need an insured peril as a prerequisite for coverage.
“That’s where there is going to be a gap in the cover,” confirmed Miller. “Because businesses are going to suffer losses from issues in connection to the virus - not in Australia, but overseas.”