COVID BI disputes are denting insurer reputations, warns GlobalData

Insurers facing business interruption claim lawsuits could lose business due to hampered reputations, according to GlobalData.

It follows news that insurers, including Aviva and Liberty Mutual, are being pursued over failing to settle COVID-19 related business interruption (BI) claims.

“Business interruption cover is a complex policy, with a crisis such as a coronavirus pandemic highlighting the ambiguity in policy wording that has driven the surge in court cases,” says Benjamin Hatton, associate insurance analyst at GlobalData.

”New BI cases continue to filter their way into the courts and as these cases continue, it is likely that policyholder trust in their provider, perhaps even in the wider industry, has diminished with many SMEs looking to switch provider or cancel altogether.

”In fact, 36.8% of SMEs that cancelled their BI cover in 2022 did so as they did not receive the level of cover they had thought they would get.”

Reasons for switching provider

When asked why SMEs chose to switch provider for BI cover, the new provider’s pricing consideration, level of cover, and reputation could not be separated as the top reasons for switching.

GlobalData’s 2022 UK SME Insurance Survey found that reputation was important to just 8.8% of SMEs switching public liability provider and 8.5% of commercial property switchers. Almost a third of SMEs switching in these two lines cited pricing as the main reason for changing insurer (32.1% and 33.1%, respectively).  

“Insurers looking to grow business in the BI line must ensure greater clarity in policy wordings if they want to maintain a reliable reputation and stem the tide of cases filed against them,” continues Hatton.

“The continuation of court cases involving BI payouts will blight new business opportunities for insurers caught up in the ongoing legal battles. It is likely that many policyholders are now reconsidering their provider and looking to purchase a policy from those deemed less likely to take matters through legal proceedings.”