Insurance commentators have suggested that the industry isn’t capable of covering business disruption at this scale. Unfortunately, that holds short shrift with customers that were expecting payouts. Many policies contained pandemic exclusions following the Bird Flu and SARS pandemics going back to 2003. What’s more, risk managers have hit the headlines by securing cover for big events – most famously Wimbledon. This suggests that pandemic awareness in the industry is not the issue. Where to lay the blame then? It is unfair to lay the blame with the clients or their brokers – neither of whom have access to modelling for the infinite risks that threaten a business. If that’s the case, can we lay blame at all?
Finding the cause for these shortcomings isn’t as simple as pointing a finger. As with all things in insurance, the truth is more complicated. But then isn’t that the problem? The real issue is one of transparency. Complex policies mean that communication between insurer, broker and customer is harder. The result is that exclusions slip through the cracks and sting everyone when it comes to the claim.
We may be biased at FloodFlash, but we think insurance is in line for a shake-up. Every headline where a customer reveals that they did not appreciate the limits to their cover is a missed opportunity to change things. Parametric cover may not be appropriate for every risk – but traditional insurers and regulators could stand to draw from the transparency of this type of insurance.
A world in which clients fully understand when they will (or won’t) receive a payout will be a better one for clients, brokers and insurers. Simplifying the cover, the quote and the policy documents must be top of the agenda for the industry. Otherwise the backlash and confusion over business interruption will not be the last scandal.
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