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The Lloyd’s of London insurer Hiscox has swung to a loss after paying out $475m for cancelled events, business interruption policies and other claims related to the coronavirus pandemic.
Admitting it had suffered some “brand damage”, the company, which insures anything from oil rigs to paintings, classic cars and businesses, struck an apologetic tone after disputes last year with a number of firms over whether their business interruption cover should pay out for the pandemic. Such policies are a key part of commercial insurance cover that pay out if a firm cannot trade as usual owing to an unexpected event.
Hundreds of thousands of small businesses that were forced to close during the pandemic won a “historic victory” in January when the UK’s supreme court threw out the appeals from six insurance companies and largely supported the arguments made by the Financial Conduct Authority in a test case and a policyholder action group. Firms could receive insurance payouts of more than £1bn collectively.
Hiscox said it had begun paying claims, and hired more claims handlers to speed up the process, with about one in three of its 34,000 UK business interruption polices paying out.
Bronek Masojada, the Hiscox chief executive, apologised for the episode. “We clearly regret the uncertainty and anguish that the dispute has caused to our customers, so it is important that we learn from this experience. The most important lesson is the need for clarity in wordings, to ensure intent is properly reflected in the policy detail. In addition, the customisation of policies has to be restricted to ensure that there is not a long tail of wordings serving very small numbers of customers.”
Small businesses are likely to suffer more in the months ahead when government support measures run out, and have also been hit hard by Brexit, which has resulted in delays at the border, complicated paperwork and extra costs.
The Covid-19 losses pushed Hiscox into a pre-tax loss of $268.5m (£192m) for 2020, compared with a profit of $53.1m the year before. Without the pandemic, it would have generated a profit of $207m, Hiscox said.
Most of the pandemic-related losses were for event cancellations, where Hiscox sold communicable disease cover, and most of those claims have been paid. The second-largest share for Covid-19 claims is from UK business interruption cover.
Robert Childs, Hiscox’s chairman, said: “2020 got off to a good start and then came the global pandemic. Over my 48 years in the business, I have experienced most of the challenges that Mother Nature and mankind have thrown at the insurance industry but Covid-19 and its repercussions have been one of the most testing.”
The Covid-19 crisis has also affected the way Hiscox works, and accelerated the digital shift of business processing, with more than 90% of its London market business done digitally last year.
Source: The Guardian
Keyword: Insurer Hiscox hit by loss after paying out for Covid-related claims | Hiscox