The past weeks have seen a flurry of legal activity in the ongoing debate surrounding business income (interruption) insurance (BI) across the country.
While the vast majority of these cases have been decided in favor of insurers, it's important to remember how this debate is integral to ensuring the insurance industry is able to fulfill its critical role in communities across the country.
A reminder of the key points to keep in mind:
- BI policies were never intended to cover pandemic risks. BI contracts were underwritten and designed to cover insurable risks stemming from physical damage, such as natural disasters and riot damage. These policies were not underwritten or priced to reflect the cost of pandemic risks.
- Reinterpreting insurance contracts would jeopardize the policyholder surplus. If insurers are forced to cover pandemic risks for which they did not collect corresponding premiums, the policyholders’ surplus—the cumulative value of insurers' assets, minus their liabilities—could be placed in jeopardy. The surplus is set aside to pay claims resulting from covered events that cause direct physical damage to property, such as fires, tornadoes and hurricanes.
- These actions could undermine insurers' ability to offer affordable BI policies in the future. New York state superintendent of insurance Howard Mills recently wrote that if insurers were forced to cover pandemic risks, "business owners would not have the ability to purchase affordable BI insurance and would be deprived of coverage when non-pandemic disaster strikes."
For more information on the true cost of rewriting BI policies, take a look at our fact sheet.