Here at M&T, we understand these are unprecedented times and our goal is to provide you with insights and information that can support you and your business. For more insights on business interruption insurance from Tom Delark, Head of Insurance Placement and Regional Market Leader for M&T Insurance Agency, listen to our webinar “The Insurance Market’s Rapidly Evolving Response to COVID-19”.
Recorded: April 2, 2020
Duration: 10:18 mins
Losses due to business disruption represent the largest threat businesses face so far related to the COVID-19 pandemic. Fortunately, there are some steps you can take now, in coordination with your insurance broker, to potentially mitigate these losses.
1. Make full use of all mitigation strategies
Businesses of all sizes should have a disaster continuity plan in place to help resume work after normal operations are disrupted. Your insurance broker can help you understand what coverage you have in place already and help develop strategies to manage business continuity challenges. (During this process, keep track of any parts of your plan that don’t work smoothly, so you can address them in the future.)
Most business interruption insurance policies are only designed to cover losses in the event of physical damage to the property where a business operates and specifically exclude losses due to viral or bacterial infection. Property insurance pays to fix the physical damage, while business interruption insurance helps make up lost revenues so businesses can pay fixed costs and ongoing expenses during the rebuilding process. To offer coverage, however, insurance carriers need to be able to predict the losses they are likely to encounter. For that reason, most carriers only cover events such as fire, windstorm or hail damage, which have relatively predictable costs.
The current situation might feel like a stretch for a movie premise, much less our daily reality. Even for insurance industry veterans experienced in measuring risk, it’s practically impossible to predict the losses that could be caused by viral pandemics like COVID-19 ahead of time. Insurers can’t accurately price coverage for those sorts of events, so they typically don’t offer coverage.
2. Ask your broker about flexibility on premium payments
Your broker may be able to work with you and your insurer to come up with flexible ways to save on current premium costs without sacrificing coverage. We have seen some carriers allow businesses to postpone payment of premiums in March and April and make those payments on an installment plan.
In other cases, carriers might offer to reduce exposures mid-term based on updated exposures that usually would get audited at year end, such as revenues, payroll, automobile count and property values. This approach provides an immediate premium return or reduced payments for the rest of the year, which can be a big help for especially hard-hit businesses like hotels and restaurants.
3. Keep up to date on potential government action
State and federal lawmakers were discussing potential efforts to provide some degree of relief for businesses affected by COVID-19. However, the insurance industry pushed back substantially, and the latest round of federal relief packages that have been approved did not address business interruption claims. Several states, including New Jersey, Ohio, Massachusetts and New York, introduce bills that would require insurers to pay business interruption claims retroactively for small businesses. Further, there has been discussion about including property & casualty insurance premiums as “forgivable” under the SBA loan forgiveness program. The situation continues to change rapidly, however.
M&T Insurance is actively monitoring how insurance carriers are responding to this pandemic and our teams are committed to keeping you informed. If you have any questions regarding coverage of losses caused by COVID-19-related business interruptions, management liability or casualty issues, call us today.
MTIA is a wholly owned subsidiary of M&T Bank.
Insurance Products offered are: Not FDIC insured; not a deposit in, obligation of, nor insured by any federal government agency; not guaranteed or underwritten by the bank; not a condition to the provisions or terms of any banking service or activity.
Insurance products are offered by M&T Insurance Agency, Inc., not by M&T Bank. M&T Insurance Agency is licensed as an insurance agent and acts as agent for insurers. In case of excess and surplus lines, M&T Insurance Agency is an insurance broker and places insurance on behalf of our clients. Insurance policies are obligations of the insurers that issue the policies. Insurance products may not be available in all states.