By Rosemary Onuoha
Following the lockdown in some states due to the Coronavirus (COVID-19) pandemic which crippled economic activities, some business owners and organizations have started approaching their insurers for claims on business interruption insurance policy.
But many insurance industry executives are saying the necessary business insurance policy does not cover pandemics such as COVID-19.
Business interruption insurance is insurance coverage that replaces business income lost in a disaster. The event could be a fire incidence, accident or public policy measure.
Financial Vanguard findings show that some of the insurers are under pressure to settle the claims demands even as business interruption claims appears to be rising by the day.
This is even as many businesses will be hard hit and could fold up as a result of the lockdown.
However, some industry operators hinted that few companies that have business interruption insurance covers in place could bounce back with settlement of their claims.
Unfortunately insurance firms said the number of those businesses with such insurance cover is significantly low as many business owners and organizations have always rejected the advice to take up business interruption insurance on the belief that the risks it tends to cover will not crystallize.
As a result while many organizations have fire and burglary insurance in place, they refused to have business interruption covers which always come as an extension of fire insurance.
Some insurance companies, on the other hand, shy away from adding business interruption covers as part of fire and burglary policy due to the fear that the claims can be huge should the risk crystallize.
Financial Vanguard findings however show that the few insurers that offered business interruption covers may be hard hit by huge claims in the wake of the Covid-19 pandemic.
Speaking on the situation, Managing Director of FBN Life Insurance, Mr. Val Ojumah, confirmed that some insurers have been hard hit by claims settlement in response to business interruption covers.
He however said that policy holders without business interruption as part of their package are now left in the cold following the impact of the lockdown on businesses.
He stated: “Unfortunately the insurance sector cannot serve as a spring board for many businesses to bounce back because a business interruption policy documents clearly states what could lead to a claim.
‘‘However, there are certain insurance policies that have provided very wide coverage for business interruptions situations and some insurers have been hard hit by the Covid-19 situation.”
But the Managing Director of Quicklinks Insurance Brokers, Mr. Rotimi Edu, said that the insurance industry is conservative in selling business interruption because the loss can be huge.
He stated: “Business interruption insurance is not as popular yet in this country as it is in advanced markets because the losses could become very colossal sometimes especially in the manufacturing industry when there is a fire.
“So a good institution would have looked at its operation and at the inception of the policy would have agreed at what and what will cause interruption in that business to enable them have a cover for it.
“If the interruption could be due to fire, then a business interruption cover can be arranged because there are just pockets of fire incidences. But where it is a global issue like the Covid-19, that means that the insurance company will be in serious trouble. That is why government is adding some palliatives.
Imagine if some small insurance companies have to start paying for salaries, loss of profit and business, it will run virtually the whole company aground.
“The fire and burglary policy offers business interruption as an extension which is consequential loss of profit or other occasional matters,” Edu stated.
Also speaking, Mr. Ayo Akande of Scib Insurance Brokers who is also a Non-Executive Director of Allianz Nigeria said that it is only in life insurance policies that pandemics are not excluded.’’
But he added: “In Nigeria, the policy wordings are quite different from what obtains in other advanced markets. For example, in some advanced markets you have business interruption policies covering pandemics or epidemics etc. which are exclusions here except under life insurance.
“So for property insurance, it is only if something happens to the building that business interruption can come into play. Unfortunately, Coronavirus does not affect buildings.
“Unfortunately, many businesses are going to record decline in profits because as people are not able to go about their business, it could affect their projected profit. While many of such businesses are hoping to get some form of relief from their insurer, business interruption is dependent on material damage to physical property. However a comprehensive package can cater for pandemics like the Covid-19.”
On his part, Managing Director of Boof Insurance Brokers, Mr Olumide Fatogun said that business interruption risks are mostly secondary as there must be a primary risk in place first. He said: “Most insured find it difficult to take up business interruption cover. Now it has opened our eyes that incomes can be lost as a result of interruptions like this.
“The operators need to change their marketing strategy to let people know more about insurances like the business interruption policy. They should carry out more publicity to get the general public informed on the benefits of insurance.”