Business interruption insurance

An interactive explainer outlining the case for a federal solution to pandemic relief.

Business interruption insurance

An interactive explainer outlining the case for a federal solution to pandemic relief.

Use your mouse or left/right arrow keys to navigate through the explainer.

Business interruption insurancereplaces income lost when a business is unable to operate due to direct physical property damage

Business interruptioninsurancereplaces income lost when a business is unable to operate due to direct physical property damage

Business interruption insurancereplaces income lost when a business is unable to operate due to direct physical property damage – caused by a fire, for example.

Business interruptioninsurancereplaces income lost when a business is unable to operate due to direct physical property damage – caused by a fire, for example.

This insurance enables a
business to protect its
livelihood until its property is
restored to its original state.

While the last few months have been challenging, insurers are doing what they can to help customers

But the industry is under threat from trial attorneys demanding insurers cover uninsured pandemic-related losses.

Beyond physical damage, in many cases, these losses are explicitly excluded in contracts

But the industry is under threat from trial attorneys demanding insurers cover uninsured pandemic-related losses.

Beyond physical damage, in many cases, these losses are explicitly excluded in contracts

Forcing insurers to cover pandemic risks is
a bad idea for many reasons.

Insurance works by POOLING RISK.

Take auto insurance for example.

The premiums taken in by the majority of drivers that get around without a problem…

...are used to pay for the few who get into crashes.

Over time, these premium payments have accumulated in what is known as the industry Surplus.

This surplus is what enables insurers to cover widespread disasters

This surplus is what enables insurers to cover widespread disasters such as TORNADOES

This surplus is what enables insurers to cover widespread disasters such as HURRICANES

This surplus is what enables insurers to cover widespread disasters such as WILDFIRES

This surplus is what enables insurers to cover widespread disasters such as VANDALISM

But that only works because such events are limited in terms of geography and time.

If insurers were forced to cover pandemics on their own, it would be like all of these events happening at once.

Such risks are simply not priced into current insurance policies.

And if they were priced in, these policies would become extraordinarily expensive.

Forcing insurers to pay out for uncovered pandemic risks would deplete the policyholder surplus in a matter of months…

...jeopardizing insurers' ability to meet covered risks.

such as AUTO ACCIDENTS

such as HOME DAMAGE

such as NATURAL DISASTERS

Across communities, insurers have stepped up in response to the COVID-19 pandemic:

Providing rebates on auto insurance - totalling over $14 billion

Across communities, insurers have stepped up in response to the COVID-19 pandemic:

Providing rebates on auto insurance - totalling over $14 billion

Implementing innovative solutions to carry out operations while safely distancing

Across communities, insurers have stepped up in response to the COVID-19 pandemic:

Providing rebates on auto insurance - totalling over $14 billion

Implementing innovative solutions to carry out operations while safely distancing

Pledging over $280 million to organizations fighting the pandemic

Only the federal government has the financial capacity to cover losses caused by pandemics.

That's why insurers have put forth a variety of policy proposals.

A pandemic relief solution must:

1

Maintain the federal government as the primary provider of financial relief

2

Provide widely accessible relief payments to businesses in a fast and efficient manner

3

Protect businesses from losses, incentivize business to retain employees, and not jeopardize insurers' existing commitments