Matt Connell, Director of Policy and Engagement for the Chartered Insurance Institute (CII) , has stressed that it is unsustainable to expect insurance and reinsurance companies to be the “mechanism for a Covid-19 bail out.”
Responding to expectations recently set out by the Financial Conduct Authority (FCA), Connell acknowledged that where insurers have made a contractual commitment to cover a risk they must honour it.
However, he added that the overall economic impact of the coronavirus (COVID-19) outbreak will be huge, and can only by mitigated by government intervention
For perspective, he noted that the London Market paid out £19.7 billion in claims in 2018, whereas the UK financial package for COVID-19 currently stands at £300 billion.
“It is not in anyone’s interests to try to reinterpret insurance contracts in the light of recent events in order to make insurers the mechanism for a Covid-19 bail out,” Connell argued. “It would simply place responsibility on insurers that no private sector organisation could sustain.”
As a result, the CII believes insurers should be allowed to set the levels of risk and cover that are consistent with their risk appetite.
The Institute’s research also shows that the insurance sector does generally meet customers’ expectations on claims, suggesting that COVID-19 claims must be handled sensitively to maintain this reputation.
“The issues for insurers that we are seeing from Covid 19 highlight the importance of professional advice for consumers,” Connell continued.
“Although insurance has increasingly been thought of as a commoditised product, there is still a strong need for professionals who are able to talk to individuals and businesses about their circumstances and needs, and help them to plan a holistic approach to managing their risks, that includes insurance as a component of this wider solution.”
He added: “This is the only way of encouraging an understanding of what insurance can and can’t do, in a way that benefits consumers and helps them plan for the future.”