What impact will the current COVID-19 situation have on my premiums at renewal?
As the COVID-19 pandemic continues to unfold and businesses adjust and navigate the challenges of changes in operations, we have received enquiries regarding how the current situation has resulted in lower insurance ‘sums insured’ at this time.
It is important to note that any reduction in revenue, wages or stock levels should be referred to your insurance broker in the first instance to discuss and understand the impact of any changes.
You are responsible to ensure that any adjustment made is realistic and reflects the current expectations of your business.
Business Interruption (BI)
A BI Policy is designed to indemnify for losses that arise following a ‘damage’ event, as defined in your insurance policy. This event would result in a reduction in revenue/profit during the indemnity period (usually 12, 18 or 24 months but can be longer).
Reducing your BI Sums Insured to reflect the impact of COVID-19 may not be the most appropriate action, particularly as for some organisations normal trading may return almost immediately once the lifting of any restrictions takes place. Even for those with a slower return to normal trading the impact of a loss during the indemnity period will in most cases be based on normal trading rather than the current abnormal short-term impact caused by COVID-19.
Whilst many policies have built in safety nets to cover increased trading or seasonal increases, these are unlikely to be sufficient to cover the amounts required if you elect to reduce your BI sums insured on the current trading position created by COVID-19.
The above guidance is offered as an overview as to why in some cases there are lower insurance sums insured at this time. However, we would recommend that you get in touch with your broker as every policy is unique. If you have any questions regarding this article, get in touch using the CONTACT option below.