Why Insurance Claims Were Never Going to Save U.K. Media Businesses from Coronavirus

U.K. media businesses affected by the coronavirus pandemic can expect no relief from insurance companies unless the disease is specifically covered in their contracts.

The U.K. government’s failure to issue a diktat to businesses — including cinemas and theaters — to shut down, and instead advising people to simply “avoid” social venues, has caused widespread concern that the soft directive has rendered them ineligible for insurance claims.

However, an advisory issued by the Association of British Insurers (ABI) makes it clear that payouts are unlikely even if businesses are shuttered by government order.

“Standard business insurance policies are designed and priced to cover standard risks and are therefore very unlikely to provide cover for the effects of global pandemics like Covid-19. This includes forced closure by the authorities,” states the ABI advisory.

The International Underwriting Association states there is no one-size-fits-all insurance remedy for the current crisis, and advocates looking at the issue on a case-by-case basis.

“(Insurance) policies can include extensions to cover losses arising from risks posed by communicable diseases. However, coverage is not standard across the market and will be tailored to meet the individual requirements and risk appetite of different clients,” Scott Farley, director of communications for the organization, tells Variety.

The scope of potential claims, therefore, will depend upon the terms and conditions agreed in each policy, Farley notes.

“Insurers have been prompt in communicating with clients about the need for postponement and cancellation of events in order to avoid any potential losses escalating due to inaction or a delayed response,” Farley adds.

In insurance terms, the current slowdown is described as a business interruption and businesses can purchase cover for ‘notifiable diseases.’ However, this is not part of most standard contracts, which usually cover named perils such as fire, flood, thefts, accidents and damage to equipment.

Addressing the coronavirus crisis, the ABI advisory states: “Only a very small minority of businesses choose to buy any form of cover that includes local closure due to an infectious disease.

“An even smaller number will have cover enabling them to potentially claim on their insurance for the presence or impact of the coronavirus pandemic. Most notifiable disease extensions tend to cover specific diseases that will be named in the cover. If Covid-19 is not specified, then cover may not apply.”

However, the advisory highlights that some ‘notifiable disease’ extensions are more general and do not specify certain diseases. “In these cases, business interruption cover for Covid-19 may apply if Covid-19 is present in the business.”

A senior insurance broker specializing in the U.K. media sector spoke to Variety on condition of anonymity. “We’ve seen with a couple of our providers, dating back to January when it was sort of in its infancy, that some people were very quick to react and placed Covid-19 exclusions on the policy.”

“At the moment, realistically, it is a bit of doom and gloom from the insurance world perspective. It is not looking like a lot of policies are going to be covering this,” the broker added.

The broker said the rationale was the same as excluding war risks, as it would be too much for the insurance sector to bear.

“If claims were to be paid out for this, it would bankrupt the market, which would be catastrophic for the economy. These are quite extraordinary circumstances at the moment,” the broker said.

As of now, the only recourse for affected media businesses not specifically insured against coronavirus appears to be the U.K. government’s temporary coronavirus business interruption loan scheme, announced earlier this week. The scheme will be active from March 23 and provide loans of up to £5 million ($5.8 million) that will be interest-free for the first six months.