Response to coronavirus outbreak - Insurance sector - Lansons
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Insurance sector response to coronavirus outbreak As of 4th May 2020
Insurance Sector Summary
01 Summary and backdrop
02 Policy initiatives impacting Insurers
03 Media and commentator sentiment
04 Insurtechs and smaller firm updates
A full company by company analysis of activity
and response is available on request.
lansons.com | Insurance Sector Summary 04/05/20 2Summary and backdrop The spotlight has been firmly on the insurance industry since the crisis began, and over the course of the last week media scrutiny of insurers has remained high. The focus continued to be on business insurance, and the class actions suit against Hiscox over lockdown insurance. Scrutiny intensified on Friday when the FCA announced that it intended to obtain a court declaration to clarify which claims should be honoured and which should not. The move was welcomed by the ABI, but some commentators criticised the FCA’s decision, claiming it will end up delaying payouts from insurers at a time when the country faces a cash crisis. Media continue to use case studies to highlight the plight of vulnerable small businesses whose insurance claims have been denied. The Times quoted an owner of one small boutique who said: “They cannot get away with interpreting the policy any way that they want when what’s covered is in black and white.” Over the weekend two groups which represent 500 businesses joined forces to pursue legal action against Hiscox for their refusal to payout for coronavirus disruption. The FCA’s latest announcement also included a proposal on how insurers can help customers in temporary financial distress and on how they assess the value of insurance products, to which they called on insurers to respond. The package of measures sets out how the FCA expects insurance firms to: • Ensure products continue to offer value and are appropriate for customers taking into account the impact of coronavirus taking into account the firm’s ability to deliver the benefits promised • Help individual customers who may be finding it difficult to pay their insurance premiums or meet their premium finance payments as a result of coronavirus Most insurers have been upfront and transparent about the measures they’re taking to support customers facing financial hardship. They have used their owned channels to good effect and encouraged customers to contact them directly for more information on how they can help. However, it is almost inevitable that more questions will be asked on whether existing measures go far enough, while questions around the FCA’s value and assessment point will continue to attract media interest over the next few weeks - and beyond. Admiral, the first insurer to publicly reveal how it would return value to its customers, continued to receive positive media attention for the return of £110m to car and van policyholders. Its move has “set a precedent” according to analysts GlobalData, and the media have been monitoring carefully to see if, and how, other competitors will follow suit. Continued… lansons.com | Insurance Sector Summary 15/04/20 3
Summary and backdrop LV= General Insurance was the second major insurer to announce it would return a portion of premiums to some customers. On Friday the firm announced it was making £30m available for both car and motorbike insurance refunds – with the rate ranging from £20 to £50, but only to those who faced financial hardship. The move was welcomed by media commentators, however insurance challenger ByMiles described the hardship criteria as “a catch” and asked “ is it enough?”, in comments that were widely reported alongside LV=’s announcement. This followed similar statements it made in response to Admiral’s news the previous week. Though business interruption and premium refunds have dominated headlines, other insurance stories, such as wedding insurers not paying out and the challenges facing the TV producers of Love Island to find an insurer have also peaked media interest. Overall, the scandal over business interruption payouts continues to attract negative media sentiment; while the reputation and actions of the industry as a whole is under much debate. In line with increased pressure from the regulator, pressure from the media is also mounting, with one commentator calling providers’ failure to pay out “insurance fraud committed by insurers.” Meanwhile, new research from McKinsey has highlighted the loss of confidence in business insurance triggered by the Hiscox furor, with one third of SME respondents in the UK saying they could stop buying business interruption cover Top 5 pieces of coverage w/c 27 April: The Times (Patrick Hoskin/James Hurley: FCA wants judge to rule on virus insurance claims MoneySavingExpert(Callum Mason): LV offers car insurance refunds of up to £50 The FT (Oliver Ralph): UK companies to shun business interruption insurance Forbes (Kevin Pratt): FCA Quizzes Insurance Firms On Customer Support, Floats Idea Of Premium Refunds ThisisMoney (Grace Gausden): 'Our wedding insurance won't cover us if we move dates': Couples reveal how coronavirus is spoiling plans for their big days, but what are your rights? lansons.com | Insurance Sector Summary 15/04/20 4
Policy and regulatory initiatives
impacting Insurers
W ith the increased scrutiny on insurers to offer financial relief, the FCA announced it
was seeking legal clarity on the business interruption insurance. The response to this
announcement has been positive from the media as well as the ABI and BIBA.
Please find below a summary of the general updates and announcements:
► [01.05] The Financial Conduct Authority (FCA) has announced it intends to seek
legal clarity on business interruption (BI) insurance to resolve doubt for
businesses who are facing uncertainty on their claims. The FCA is seeking to
bring to court what it believes are the key relevant cases which provide the
greatest clarity on specific policy clauses as soon as possible to get an
independent view on these disputed BI insurance policies if there remains
unresolved uncertainty. The FCA is looking to announce its findings on the 15 th
May.
► Ensure products continue to offer value and are appropriate for customers
taking into account the impact of coronavirus taking into account the
firm’s ability to deliver the benefits promised.
► Help individual customers who may be finding it difficult to pay their
insurance premiums or meet their premium finance payments as a result of
coronavirus.
► [01.05] Commenting on the FCA statement on insuring SMEs and business
interruption, ABI Director General, Huw Evans, said: “This is a welcome step from
the FCA and insurers will look to work closely with the regulator to make this
process a success. Although the vast majority of business interruption policies do
not cover pandemics and the Government has confirmed it will not seek to
retrospectively amend contracts, we support any process that will provide
clarity and certainty for the minority of customers who are disputing whether
they should be covered..”
► [01.05] Graeme Trudgill the executive director at BIBA commented on the FCA
announcement stating that. - “BIBA welcomes this morning’s statement from
the FCA confirming that they intend to seek an authoritative declaratory
judgment to resolve some of the contractual uncertainty around business
interruption insurance…. “This intervention from the regulator to create
certainty for many customers making BI claims, and the basis on which firms are
making decisions on claims is a step in the right direction. The FCA has indicated
that customers may still access the Financial Ombudsman or the courts if they
qualify and wish to do so. ”
lansons.com | Insurance Sector Summary 04/05/20 5Policy and regulatory initiatives
impacting Insurers
► [29.04] During PMQs Dominc Raab answered a question on the issue of business
insurance from Alison Thewliss (SNP, Glasgow Central). Thewliss said that some
insurers were refusing to pay out on business interruption policies and asked the
Government to intervene. The Government's view is sympathetic to the industry
and Raab's comment is an indication that they will not intervene in this area.
► [27.04] The ABI and the Association of Consumer Support Organisations (ACSO)
have worked together to develop a Statement of Intent for progressing claims
during the COVID-19 crisis. The Statement of Intent is only intended to apply
during the current lockdown situation. Whilst the Statement of Intent is not
binding on compensators or claimants it will give extra support and reassurance
to customers and claimants during this difficult time. The ABI and ACSO will
undertake a joint review of the Statement of Intent during the week
commencing 11 May 2020 with any revisions to the Statement of Intent being
published by 15 May 2020.
► [24.04] The body which represents around 90% of all motor insurers in Ireland
says its committed to looking into how a refund scheme for drivers could be
rolled out here. Insurance Ireland is responding to a request from Finance
Minister Paschal Donohoe yesterday to be "generous" and "do the right thing"
by customers during this difficult time. The idea of a rebate scheme was
welcomed by the Consumers' Association of Ireland (CAI) today, who said it
makes sense and can be done.
► [24.04] In response to a data request from the Treasury Select Committee (TSC),
the ABI said UK insurers face paying out £1.2bn for the crisis – both to businesses
and individuals.
► [24.04] The SNP has said that the Financial Conduct Authority (FCA) needs to
take action with insurance companies refusing to cover valid business claims.
The FCA has previously written to firms urging them to pay out, where
appropriate, in the wake of the COVID-19 crisis. Their letter said: “Based on our
conversations with the industry to date, our estimate is that most policies have
basic cover, do not cover pandemics, and therefore would have no obligation
to pay out under the COVID-19 pandemic. While this may be disappointing for
the policyholder, we see no reasonable grounds to intervene in such
circumstances.”
lansons.com | Insurance Sector Summary 04/05/20 6Media and commentator sentiment Overview Following Admiral’s announcement, the media has continued to monitor for news from other providers. LV=‘s announcement at the end of the week was received positively overall, however, as with Admiral, there was the odd commentator who questioned whether the initiative went ‘far enough’. The announcement on Friday from the FCA was widely covered and well received by the media and many commentators. Journalists will be keeping a close eye on the industry over the coming weeks before the FCA announces its findings later in the month. Media commentators: [02.05] Simon Sloane, a lawyer with Fieldfisher who is acting on behalf of clients in dispute with RSA, Hiscox, QBE and Ecclesiastical, the insurers, said: “It is critical for the credibility of both the FCA and the insurance industry that all appropriate legal issues are included in any test actions and that this does not merely become a tool for insurers to deny further claims.” [02.05] Ravi Nayer, a partner at Brown Rudnick, said that the FCA’s approach could do more harm than good. “This action by the FCA will end up delaying payments by insurers, which is unhelpful for businesses across the country facing a cash crisis right now.” [01.05] James Blackham, CEO of By Miles, says the LV scheme doesn’t go far enough. “W hile another major insurer, LV, offering refunds to customers is a good thing – what they are offering is actually a step down from Admiral’s support. W hile Admiral gave an automatic £25 refund to all customers, LV is only offering refunds of between £20 – £50, but only to those who can prove they are financially worse off due to coronavirus.” [01.05] North Belfast MP, John Finucane MP, following the FCA announcement on Twitter said ‘The FCA action is both welcome & necessary. Tens of thousands of jobs & livelihoods, representing millions of pounds to our economy, are at risk due to the unreasonable stance of insurance companies.’ [01.05] Rachel Dalton, Insurance Insider reporter, on Twitter commented that it was an interesting move form the FCA, saying that it’s ‘presumably to prevent a whole raft of individual legal actions that will drag on for years.’ [01.05] Steve Double, Conservative MP, took to Twitter following the FCA announcement, posting ‘I welcome that @TheFCA are seeking legal clarification on business interruption insurance claims for impact of COVID-19 that are being refused by insurance companies. Hope it will result in positive news for companies in Mid #Cornwall’ lansons.com | Insurance Sector Summary 04/05/20 7
Media and commentator sentiment [29.04] In a City AM opinion piece, Stephan Shakespeare wrote that ‘Admiral’s car insurance refund will be remembered’ [28.04] Following the news that the ABI has predicted that COVID-19 non-life related claims will exceed £1bn. Ben Carey-Evans, Insurance Analyst at GlobalData, commented: “The figures [also] highlight the significant strain on business interruption insurers. It was only the eighth most popular small to medium enterprise (SME) insurance product in 2019, in terms of penetration, yet it is expected to account for £900m of the £1.2bn in claims. “GlobalData’s survey shows that the five biggest players within business interruption insurance in the UK in 2019 were AXA, Zurich, Aviva, Barclays and LV=. AXA was the leading player, with a share of 7.5.” [25.04] The British Chambers of Commerce's head of economics, Suren Thiru, said cash flow was an 'urgent concern' for its member businesses "so it is particularly disappointing that many are facing an uphill struggle to access such a vital lifeline. "The insurance industry has the opportunity to demonstrate that it is there for our business communities when they need it most - and work together with government to help their customers weather this unprecedented economic crisis.“ [24.04] Head of Personal Finance, Lauran Davison at The Telegraph, has written a piece discussing how this period could ruin or build their reputation. Stating, “Insurance companies are wasting an easy and largely inexpensive opportunity to repair their reputation among customers.” [21.04] Following Admiral's announcement Money Saving Expert, Martin Lewis specifically pointed out the discounts offered to motorists from car insurance firm Admiral as a way motorists can reduce costs. Martin Lewis confirmed other insurance providers had “yet to say” whether they would follow Admiral's move in offering money off. He said: “The Admiral Group has said it'll give every car and van insurance customer an automatic £25 refund, and while other UK biggies are yet to say if they’ll follow suit there’s plenty of other ways to save while not using the car.” [21.04] James Blackham, the chief executive of By Miles, which provides cover on the basis of car usage, said Admiral’s move, while welcome, does not go far enough. “W e’ve calculated that over a two-month lockdown, drivers could be between £35 to £58 out of pocket, for each car they own … It’s a shame, too, that the refund won’t be processed until the end of May.” [21.04] Gareth Shaw, head of money at Which?, said: “People will remember how businesses treated them during this crisis and Admiral’s decision to provide partial refunds to all of its car and van policyholders will certainly be welcomed by customers experiencing unforeseen pressure on their finances.” lansons.com | Insurance Sector Summary 04/05/20 8
Insurtechs and smaller firm updates
Overview:
[01.05] Fintech magazine awarded AXA Next the number 9 spot in their “Top Ten
Fintech Innovation Labs”. They highlighted AXA Venture Partners: AXA’s dedicated
fintech and insurtech investment fund. Endowed with €600 million, this international
fund invests in companies at different growth stages. Fintech magazine
[30.04] Insurtech startup funding hit three-quarters of a billon dollars in the first quarter
of 2020 before the coronavirus crisis put the brakes on deals, according to Forrester
Research. According to their research, funding is the lowest since 2018. Digital
Insurance
[20.04] CEO and founder Getsafe, Christian Wiens outlined how insurtechs have an
advantage over traditional insurers. “While traditional insurance companies have to
almost stop operations in times like these, digital insurers are hardly affected by crises
like this. They don’t rely on brokers or agents and they are built on digital processes
that allow them to continue their daily business even when all employees work in
isolation from home”. Insurance Business Mag
[17.04] Mordor Intelligence has published a new report entitled “Global Insurtech
Market - Growth, Trends, and Forecasts (2020 - 2025)”. Global Insurtech Market
revenue is valued at 5.48 billion in 2019 and is expected to reach 10.14 billion by 2025,
growing at a CAGR of 10.80% during the period 2019-2025.
A full company by company analysis of activity
and response is available on request.
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