Big, small insurers toy with pandemic-proof policies for post-Covid world

Insurers are creating products for a world where virus outbreaks could become the new normal after many businesses were left out in the cold during the Covid-19 crisis.

The providers include big insurers as well as niche ones that see an opportunity in filling the void left by mainstream firms that categorise virus outbreaks like wars.

Tech firm Machine Cover, for example, aims to offer policies based on traffic levels around businesses such as restaurants, department stores, and car dealers. If traffic drops below a certain level, it pays out, whatever the reason.

The company’s founder Inder-Jeet Gujral said: “I believe this will be a major opportunity because post-Covid, it would be as irresponsible to not buy insurance against pandemics as it would be to not buy insurance against fire.”

Pandemic exemptions have helped some insurers emerge relatively unscathed. Some insurers that paid out for event cancellations and other losses have removed pandemics from their coverage.

British risk managers association Airmic said the pandemic had contributed to a lack of adequate insurance at an affordable price and members were looking at other ways to reduce risk.

To help fill the void in a locked-down world, Lloyd’s of London insurer Beazley, started selling a contingency policy to insure organisers of streamed music, cultural, and business events against technical glitches. “These events are completely reliant on the technology working and a failure can be financially crippling,” said Mark Symons, contingency underwriter at Beazley.

Marsh, the world’s biggest insurance broker, has teamed up with AXA XL, part of France’s AXA, and data firm Arity to help businesses such as US supermarket chains, restaurants, and e-commerce retailers cope with the challenges of social distancing.

With home deliveries surging, firms have hired drivers to meet demand, but commercial auto liability insurance for “gig” contractors with their own vehicles is hard to find.

Marsh devised a policy based on usage with a price-by-mile insurance, which can be cheaper than typical auto covers as delivering a pizza doesn’t have the same risks as driving people around.

A report by Capgemini showed that demand for usage-based insurance has skyrocketed since Covid-19 broke out and more than 50 per cent of the customers it surveyed wanted it. However, only half of the insurers said they offered it.

Since businesses are only now learning how outbreaks can affect them, some new products are effectively custom-made.

Elite Risk Insurance of California has been offering “Covid outbreak relapse coverage” for businesses forced to shut down a second time, its founder Jeff Kleid said. The policies are crafted around specific businesses and only pay out when certain conditions are met, Kleid said.

For film production companies that could be when a cast member contracts the virus. Another client, which raises livestock for restaurants, is covered for a scenario in which it would be impossible to get animal feed. Such policies do not come cheap. A $1 million policy could cost $80,000-100,000 depending on the terms. “The insurance ... is costly because it covers a risk that does not have a historical basis for calculating the price,” Kleid said.