Should business interruption insurance cover coronavirus?
“Insurers would be given the opportunity to provide coverage, or not, and have their reputation judged accordingly”.
What do you think? Let’s look at it from both angles.
Yes, business interruption should cover coronavirus
1. Businesses paid for business interruption
Be it your dry cleaner, or the family-owned small café in your neighborhood, these folks paid a higher premium to be covered for business interruption. The insurance company, which employs sophisticated actuaries, failed to quantify the cost of coverage against a virus and offer it to them. Instead, they lobbied and got an exclusion.
2. That’s what insurance is for
The concept of insurance is that we all put money in a little box. Then, when something happens, we used that money to compensate for losses.
3. They also paid 50% more, for expenses and profits
Small businesses, instead of putting their money in a communal box, “paid double” to use insurance companies. Research at Columbia University shows that insurance companies only use ~50% of premiums for claims. The rest goes to insurance companies’ expenses and profits. Not to claims.
4. Insurers have the cash to pay
Property and casualty insurance companies are in a strong position to pay any covered claims. The cumulative surplus was $800 billion in ’19, eight times the amount for claims paid 2017, according to the National Association of Insurance Commissioners.
5.Was the virus exclusion legal?
Before Obamacare, pre-existing conditions were excluded by health insurance. Obamacare made that illegal (surveys show everyone supports it, including 95% of employers, whose premiums increased). The virus exclusion should be made illegal.
A New Jersey bill was introduced requiring every business interruption policy to include coverage due to a global virus or pandemic. The coverage will be for losses during the state of emergency. Several other states have introduced similar legislation.
6. Insurance companies will be refunded for these payments
The legislation requiring every business interruption policy to include coverage for coronavirus would apply only to businesses with 100 or fewer employees. Further, insurers will be able to apply to the state for reimbursement.
No. Business Interruption should not cover it.
- The “direct physical loss or damage” requirement has not been met
The insurance policy requires direct physical damage to property to cover it. That didn’t occur.
2. The Sanctity of contracts will be compromised
The possibility that contract terms can be reinterpreted by legislators, regulators, or courts will have a negative impact. Some law firms believe that it violates the Constitution.
3. Small investors will bear part of the cost
Insurance companies are owned also by thousands of small investors, either directly or through ETFs.
What do you think?
“Insurers would be given the opportunity to provide coverage, or not, and have their reputation judged accordingly”. That quote is attributed to Assemblyman Roy Freiman, who introduced the NJ Bill.
Please also add your comments, both in favor and against, below.
To sign a petition requesting that the virus exclusion be voided go here