The World Health Organization confirmed on March 12 that the COVID-19 coronavirus outbreak would be classified as a pandemic, with the Australian government announcing a stimulus package to help stave off economic collapse in the country. In light of this, the Insurance Council of Australia (ICA) also announced that the ongoing outbreak was an “insurance catastrophe.”
While information is minimal, due to the fact the outbreak in Australia is ongoing and in its early stages, the ICA provided a classification for the virus and some important information.
It believes the virus and the implications of it are ‘catastrophic’ for the insurance industry. The council stated that the extent of claims and losses related to the coronavirus is unknown at this point but it also announced that an insurance industry taskforce has been formed to ensure that accurate claims data is captured by the industry, and that insurers’ positions on the virus can be understood by stakeholders.
The ICA additionally provided some information to provide clarity on what cover there is related to the virus, with issues relating to travel and business interruption insurance being the most relevant.
“Most travel insurance policies have exclusions for outbreaks of infectious diseases, pandemics, epidemics and/or known events that could lead to a claim,” the ICA announcement read. “Travel insurance policies purchased after COVID-19 became a known event are unlikely to cover travellers who are overseas or who are yet to travel for coronavirus-related expenses.”
Business interruption will be similarly hard to claim. Insurance Business recently explored the trouble with business claiming coronavirus-related losses on insurance. In that article, it became clear that it is hard to make a claim on something that is unlikely to occur on the actual premises of a company. 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 with this thesis.
“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.”
The ICA recommended that if you do not understand how your policy may respond to COVID-19 triggered losses, to speak to your broker or your insurer for more information.