Agents Beware: higher insurance premiums likely despite row over losses

The company at the centre of a controversy over estate agents’ business interruption insurance says its core package does NOT cover losses incurred because of the lockdown.

At the same time, it's indicating that premiums may be set to rise.

Some agents are believed to have taken out business interruption insurance with Hiscox - in some cases through brokers approved by Propertymark - but have been told in recent weeks that their cover does not include forced closures because of Coronavirus.

A statement from Hiscox to its shareholders yesterday reveals the apparent limitations that it is putting on its liability to policy holders, which include agents. The statement says:

“Hiscox is … receiving claims as a result of economic losses following government action to stop the spread of COVID-19. Like others in the industry, Hiscox UK's core small commercial package policies do not provide cover for business interruption as a result of the general measures taken by the UK government in response to a pandemic.

“As described in its announcement on 15 April, Hiscox UK has approximately 10,000 customers that purchased cover for business interruption and have been directly impacted by mandated government premises closure to stop the spread of COVID-19. 

“Over 70 per cent of these customers have monthly revenues of less than £40,000 in a normal trading environment, with a significant proportion below £10,000 per month. The level of economic loss experienced is likely to be materially lower than reported revenues.

“A number of UK policyholders have disputed the application of their policy in relation to business interruption. 

“Hiscox recognises these are extremely difficult times for businesses and is determined to help provide greater certainty for customers. As a priority it will therefore work with the UK insurance industry, its regulators and its customers to seek means of expediting resolution through the range of independent mechanisms available.”

The insurance company says it’s “actively settling claims” for event cancellation and abandonment, media and entertainment and other sectors including travel. 

It anticipates that if there are continuing restrictions on travel and mass gatherings continues lasting for a six month period from March 2020, it’s likely to pay claims valued up to $150m. 

And its statement ends with a warning about costs for companies wishing to take out insurance in the future: “Hiscox expects this uncertainty and consequent capital contraction to influence rates across wholesale and reinsurance markets.”