Coronavirus disease 2019 (COVID-19) has revealed that standard commercial insurance policies are not designed to protect against the financial impact of a global pandemic. Standard property policies, for example, do not cover business interruption claims in the absence of direct physical loss or damage to property. Policies that don’t already have broad virus exclusions soon will. To fill this coverage gap, insurers are offering new epidemic-specific insurance products that do not require physical property loss or damage to trigger coverage.
It is too late to purchase coverage for COVID-19 claims, but businesses struggling to survive this pandemic are looking for ways to protect against the next one. Epidemic-specific policies can be designed to meet the specific needs of various industries that are particularly vulnerable to pandemics, such as hospitality, tourism, manufacturing, retail, construction, healthcare and education. A number of coverage features are available, including:
- business interruption coverage;
- delay in start-up coverage;
- modifiable claim triggers;
- post-epidemic public relations;
- epidemic expert consultation;
- early prevention coverage;
- temporary site closure coverage; and
- event cancellation coverage.
Policies can be structured to pay claims on an indemnity or parametric basis. Unlike traditional indemnity policies that cover an insured’s actual losses, parametric policies pay a fixed sum upon the occurrence of an agreed-upon trigger, regardless of an insured’s actual losses. Epidemic-specific parametric policies use straightforward parameters or indexes, like infection or mortality rates in a defined area, to trigger coverage.
Given the unique nature of the risk and the customizable scope of coverage, the application and underwriting process for epidemic-specific policies is somewhat more involved than for standard policies. The process, however, is necessary to identify specific risks and modify coverages accordingly. Please contact us if you would like more information about epidemic-specific insurance coverage for your business.