Association of British Insurers’ James Dalton speaks to Ian Taylor ahead of his Travel Convention address
The costs of the Covid crisis are already enormous but it’s too early to draw many lessons, says James Dalton, general insurance policy director at the Association of British Insurers (ABI).
Dalton will address Abta’s Travel Convention on October 14 on the implications of Covid-19 for insurance.
Like everyone, he said: “The insurance industry continues to live through the crisis.
“The industry will have lessons to learn, but we’re in the middle of the pandemic. None of us knows what water remains to flow under the bridge.”
He noted insurers’ immediate response was “nervousness”, saying: “People pulled out of the market, refused to issue new business.
“Since then, people have come back in and are issuing new policies with Covid exclusions.”
Dalton explained: “The Covid pandemic is a ‘known event’ – and you have never been able to insure against ‘known events’.”
The sector has come under fire for not paying out business interruption (BI) insurance for losses due to the pandemic, to the extent that the Financial Conduct Authority (FCA) brought a High Court case against eight insurers. The FCA argued that while most BI policies “focus on property damage”, a minority include ‘disease’ and ‘denial of access’ clauses.
The court ruled broadly in the FCA’s favour on September 15, but an appeal is expected.
Dalton said: “Standard BI insurance was never designed or priced to cover a global pandemic. There will be a decision on whether to appeal.”
One lesson he can draw, he said: “The crisis has demonstrated pandemic insurance can’t be provided by the insurance market alone. The global nature of the risks is too huge. If it is to be available, it needs support from government.”
He added: “We’re in regular dialogue with government and regulators about the challenges businesses face.
“We identified quickly there would be an impact on businesses’ ability to trade with one another with confidence, so we negotiated with government on a £10 billion trade credit insurance scheme with a government backstop that is helping thousands of businesses trade in a confident way.”
A second lesson is “open communication is vital”, he said, insisting: “Sometimes people don’t like the message, but it needs to be communicated. The insurance industry came in for a lot of criticism, in particular on business interruption, but it was important to be clear at the outset so that businesses and consumers could make judgments.”
He said: “What we’ve done quite well is recognise the concerns people have and respond to them. So if you work from home, for example, you don’t need to tell your insurer.
“We continue to work through the implications for travel and business insurance, and the market will continue to adapt.”
The Travel Convention
October 14, 2020 (09.00-17.00) Brought to you virtually
Members £125; non-members £249