Yesterday, Insurance Journal's Academy of Insurance director Patrick Wraight weighed in on the ongoing debate over business income (interruption) insurance (BI). His conclusion? Business losses caused by pandemic-related shutdowns are a problem that can't be solved by insurance.
- BI policy contracts clearly specify that coverage extends only to physical damage, with most explicitly excluding coverage for viruses. "Is the problem that insurance companies aren’t paying for COVID-19 business income losses? No. That’s not the problem. The claims are being denied because the companies are reading the policies correctly in this case."
- These policies are in full compliance with state regulations. "Is the problem that some insurance policies exclude coverage for property losses related to viruses? No. That’s not the problem. If the policy is written by an admitted carrier, the state had to approve all of the forms before they were issued."
- Proposed legislative solutions that would retroactively change contracts to cover pandemic-related losses are based on a fundamental misunderstanding of insurance. "Take it from someone who lives in a state where property insurance is changed by the state legislature almost every year. This is a terrible idea. The legislatures should stay out of mandating insurance coverage. They don’t know what they’re doing."
Understanding the need to protect businesses from future pandemic-related losses, the FAIR initiative has established a set of policy principles for a government-backed pandemic recovery solution. Find out more here.