In the United States, just over one third of small businesses add business interruption insurance (BI) on to their commercial property policy, according to the Insurance Information Institute. That means the vast majority of small businesses had no access to BI coverage when the COVID-19 pandemic struck, and those who did have struggled to make claims due to coverage exclusions for virus and pandemic risks. As a result, the small business community has been hit particularly hard by the ongoing public health crisis.
“We must find a solution that makes economic survival accessible to small business owners as well as large ones,” said Wayne White, president elect of the National Association of Professional Insurance Agents (PIA National). This is a cause close to the heart of the association, given that the majority of its members are small business owners, many of whom are feeling the economic sting of the current pandemic.
The solution that PIA National is calling for is a public-private partnership through which the federal government and private industry will unite to provide compensation for business interruption losses resulting from future pandemics or public health emergencies.
PIA National is supporting the Pandemic Risk Insurance Act (PRIA), introduced by Congresswoman Carolyn B. Maloney (D-NY), senior member of the House Financial Services Committee, as that potential solution. White commented: “PIA National believes that keeping a future pandemic from causing economic disaster requires a public-private partnership, and the insurance community can be a part of that solution.”
However, there’s still the issue of small businesses’ low take-up of business interruption insurance. If something like the PRIA does get passed into law, it must be strategically and economically viable for the small business community.
Global property & casualty insurer Chubb has been one of the frontrunners in calling for a public-private partnership to address catastrophic pandemic events of the future. The insurer is seeking a solution that differentiates between sizes of business, granting smaller businesses more immediate access to capital and resources than their medium and large-sized counterparts.
“Part of the Chubb plan seems to make sense when it addresses a mandatory offer, with an affirmative decline from those that don’t want it,” said White. “That seems to address the low take up rate that we currently experience in business interruption coverage.
“We do hesitate somewhat as to the role that puts on the independent agent, and particularly in the claims process, where I think the carriers and the agent are the key. The agent, generally, is the first contact point in the event of a claim, if nothing more than to find out if they have coverage. So, it falls to us as representatives of those independent agents to try to keep them in the loop with their carriers, who are well positioned to deal with claims, even on the basis of PRIA.”
White concluded his address to Rep. Maloney by saying that he thinks the PRIA is a step in the right direction. He alluded to the similarities between the proposed Act and the Terrorism Risk Insurance Act (TRIA), which was introduced as a federal “backstop” for insurance claims related to acts of terrorism following the 9/11 attacks.
“This is certainly very similar, where carriers feel that the severity and frequency [of losses] are not predictable, and they’re concerned about industry surplus,” White noted. “The public-private partnership addresses that issue so that it should allow carriers to participate in this.”