The insurance industry has faced pressure in light of the fact that the majority of business interruption policies do not cover the fallout from the Covid-19 outbreak. However, one of the most prominent business interruption insurers faces a legal battle that has the potential to change the industry’s status quo.
Hiscox is the fifth largest business interruption insurance provider among UK SMEs, according to GlobalData’s 2019 UK SME Insurance Survey. SMEs account for 99% of all businesses in the UK, making Hiscox one of the largest business interruption insurers among all businesses in terms of the number of policies sold.
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The company is now facing a lawsuit from business owners over policies it sold that stated it would pay out when a business was forced to shut by a government authority following the outbreak of a notifiable disease. The outcome of this case will have global implications for the insurance industry.
If Hiscox is determined to be liable for payouts, other insurers with similar policy wordings will undoubtedly face legal action as well. In fact, other insurers are already in the spotlight for having similar terms to Hiscox. While the number of policies with this kind of wording may be limited, these insurers will still face payout costs.
On the other hand, if the legal system judges that Hiscox is not liable to pay these claims, the insurance industry will still suffer. There will be a serious drop in trust among customers about not only business interruption policies but other forms of commercial insurance as well.
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By GlobalData
While the uptake of business interruption insurance has generally been increasing over the past few years, the policies will come under intense scrutiny by business owners once their policies are up for renewal. A decision in favour of Hiscox will not help restore trust in this product. Either way, this legal battle will have a negative impact on the insurance industry.
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