Following the statement from the World Health Organisation formally declaring the COVID-19 virus a global pandemic, and the new restrictions announced by federal, state and territory governments, there is growing uncertainty over the impact and length of time businesses will be feeling its effects.
allinsure Managing Director Peter Chamberlain says now is the time for business to be looking to make changes.
“As we’ve seen this week, and particularly so far this year, the business landscape in Australia has changed dramatically and operating a business has never been harder in these uncertain times,” Mr Chamberlain said.
“Whether we like it or not, when we come out the other side of this, we are going to be living in a vastly different world. Right now, businesses should be looking to be innovative and agile. Many businesses now have an opportunity to find efficiencies, new services and products as most of us are not going back to the way things were three months ago.”
He says businesses should be using all their professional partners to assess opportunities, risk and get advice.
“Talk to your accountant, your insurer, your bank and your marketing team. They can all help at this time. We can help come up with strategies to minimise risk and protect your business so that it will come out the other side in even better shape.”
Mr Chamberlain advised that many businesses may have insurance but insurers may not payout as a result of interruption to business or in some cases cancelled travel.
Dr Allan Manning of LMI Group outlined the general position of insurers in Australia for Business Interruption and Travel Insurance.
“General insurance is unlikely to provide the protection that it does for traditional risks such as fire, burglary or storm. While some specific insurance policies may differ, even the majority of business policies are likely to contain exclusions relating to losses caused by any disease notifiable under the Quarantine Act 1908.”
Dr Manning explained that traditionally, business interruption policies only covered disruption to a business as a result of damage to the insured property.
However, over time, insurers widened the protection to provide coverage as a result of a closure of the business by a public authority for a number of risks, including infectious disease. This was designed to cover things such as an outbreak of Legionnaires disease or measles, which can close down one or two buildings disrupting a small number of businesses.
The outbreak of SARS in 2013 prompted insurers to model how large claims could amount be in the event of a major pandemic. They found that insurers could not meet business interruption claims arising from a large scale pandemic, so the insurance industry introduced a clause which excludes any disease that is notifiable under the Quarantine Act.
Mr Chamberlain advised that as of the end of January 2020, COVID-19 has been defined as a quarantinable disease as per the Quarantine Act, repealed and replaced by the Biosecurity Act 2015, and so all but a few policies exclusions will take effect from that date.
“This means that, regrettably, there is no insurance protection for disruptions to business arising from coronavirus.”
In good news, many business travellers that have been disrupted are likely to get coverage for cancellation of trips due to travel restrictions to countries that are at Level 4 – Do Not Travel (now all countries).
“Quality corporate travel insurance policies that were in place should respond for cancellation cover of travel booked prior to COVID-19 no longer being seen as a unforeseen event but dates will vary from insurer to insurer,” Mr Chamberlain said.
“A decision not to travel, where the travel warning level is not at the trigger level stated in your corporate travel policy, will not activate the insurance coverage. Now that coronavirus has reached the listed disease level, most insurers are placing a specific exclusion for losses occasioned by or happening through coronavirus. This may be lifted once the disease is brought under control but only time will tell.
“Business is changing day by day, the best thing for businesses to do now is to take a look at what they are doing, be innovative. Talk to us, talk to all your valued professional partners, there is help out there whether it is premium relief or assessing your risk profile, just ask.”