Once you take a look at the numbers available on the business reports, you would realize that there is a problem. About $1 Trillion are the losses business counts almost every month due to the outrageous effect of the COVID 19 pandemic.
Based on the reports made available by American Property Casualty Insurance Association, insurers are only able to access $4.5 billion a month for the property policies. These numbers are not adding up, and of course, there will always be a deficit somewhere somehow.
In a bid to solve these problems, the House Financial Services Committee is presented with a proposal that entails the provision of special relief funds to help cover the type of pandemic experienced in 2020 in the near future. The brokers and the agents have made it a point of duty to see this proposal through in order to prevent such occurrence in the future, where businesses are suffering due to lack of funds.
In summary, the proposal is themed BCPP (Business Continuity Protection Program), which would cater to about 80% of the losses experienced by businesses such as operational losses, payroll expenses, some core business losses, which would be available for up to 3 months. The government would be responsible for subsidizing these losses and helping with revenue replacements policies to aid business functionality in a pandemic case. The BCPP program is designed to function like the existing Federal Flood Insurance Program, which has the US government as the sole underwriter and the insurers facilitating the program’s policies.
Pandemic Risk Reinsurance Program
Besides, amidst the present coronavirus pandemic, Carolyn Maloney (D-N.Y.) a congresswoman has moved a motion for the creation of Pandemic Risk Reinsurance Program, that would allow insurers to make a decision either to buy into the program and allow businesses under their watch make a decision or participating or not. It is considered a program to assist the business in terms of losses that might be caused by similar events experienced during the coronavirus pandemic. In research firm Dowling and partners words in the IBNR publication, the program can be perceived as “a bailout program masquerading as an insurance policy.”
Indeed, the enormous impact that has been witnessed by the global pandemic, which includes various business losses, cannot be insured by private sector insurance companies, without help coming from above (the government). Chubb, a versatile insurance giant in the United States, has designed her Pandemic Business Interruption program, which is sectioned into two major categories. The categories are designed to accommodate both small and big businesses. More so, insurers representing small businesses would be forced to participate in this program as they would benefit in the long run. However, buying in a medium and large scale business would be based on their will.
In the PBI program, medium and large businesses are expected to join the program by paying $50 million while the policies and protection run for a limited time of three months. The “risk-appropriate premium” fees, as it is referred to, would not be used to cover lost profit during this period. More so, for small businesses that intend to join, the program would have their payroll and operating cost covered for three months in most cases. However, Chubb stated that in the event of small business that opts out of the coverage would not be eligible to receive any assistance from the government in time of a pandemic. Although, in the Chubb’s pandemic event proposal, it would not cover the coronavirus infection recurrence on business, while the BCPP covers that.
Businesses VS COVID-19 and lawsuits
What has been imminent so far is that the COVID-19 has been a wake-up call for business, individuals, insurance companies, and government parastatals, which are responsible for economic development. Insurance companies have also found that there is a need to defend the business against interruption like what has been experienced in the present.
From states to states, there have been different types of lawsuits being filed by businesses of various types, from restaurants to sports teams and even law firms against insurance companies denying their claims on the business disruption caused by COVID-19. Although, insurance companies responded to the claims laid by business and also argue that there aren’t any physical damages to property, which is the only condition to trigger coverage.
Furthermore, in some of the suits witnessed by businesses against their insurers, that the coronavirus itself has a damaging effect on properties as it sticks to surfaces of any material. Besides, in some other suits, which the insurance policies excluded some virus and bacteria damages specifically, the plaintiffs argue that the government order to restrict business activities and prevent movement as triggered all the risks that could be associated with a business. The case was blamed on the government policies and orders which were not caused by the coronavirus.
So far, there has been a consideration by legislators in different states in the US that would force several insurance companies to pay out the claims laid on them by their clients. This is because insurers are avoiding business disruption claims because they are considering the enormous amount of money they would use to pay out the claims, which would amount to about $800 billion. Besides, insurers are issuing warning notes to their clients and the lawmakers stating that the forceful payment of the claims laid wouldn’t last on the business disruption claims they are requesting.
Certainly, the coronavirus event has been a key to producing pilot programs that would help support small, medium, and large scale businesses in the event of a pandemic in the nearest possible future. Also, defense for business has created a channel for new insurance types that would help the business stay afloat during subsequent years. While the world seeks to balance the numbers and focus on sustainable ways to get past the present economic realities, there must be a necessary preparation for future worst-case scenarios, which could be easily prevented, and the world is going back to normal.