A challenging year for business insurance

Ben Leah, Director of Hayes Parsons Insurance Brokers, reflects on the current Financial Conduct Authority (FCA) business interruption “test case” and its implications for museums in a changing insurance market.

Insurance started the year with a poor reputation, and the COVID-19 crisis has crystallised this view in the eyes of many museums. Whilst the industry pays over 96% of all claims according to the Association of British Insurers, it often does not feel this way.

The “Test Case”
The decisive action the FCA took to provide clarity was welcome, but we were disappointed many insurers were too dismissive of their policy positions at the outset, and even now are relying on courts to determine their own policy coverage. The recent judgements (more than 150 pages worth) have brought about clarity, to an extent, without being fully conclusive. The judgements relate to how courts would
interpret different styles of policy wordings, but it would be down to the assessment of each policy in the context of how written, and
the situation presented, as to whether claims may be successful.

Where are we now?
At the time of writing, most insurers, and the FCA, are still ‘assessing their position’ whilst the Supreme Court gets ready to hear potential appeals. They are expected to conclude the appeal hearings on 19 November. However, this is a complex matter and whilst the courts are determining at breakneck speed we fear the saga may become more protracted, which does not help the view that insurance is too complicated and outdated.

What does this mean for museums?
Many museums will be insured with insurers we are familiar with, whose business interruption coverage in this area is broadly written in a similar way. Although the FCA judgement may not have named them explicitly it is widely accepted some policies will not respond, and you should have been communicated with to this effect. Where you have received more of a ‘holding update’ from your insurer the advice is to sit tight and await further news.

The changing market
Depending on where you are in the renewal cycle, we would recommend giving additional consideration to how you review and procure your insurances. The insurance industry had already been going through a period of change, albeit you may not have experienced this as competition has remained fierce, but the pandemic has accelerated the way insurers are reviewing the risks they wish to provide cover for. You should expect to see premiums increasing; additional emphasis on what insurers will and will not insure; stricter compliance with policy conditions and less choice. When speaking with your current provider, if the above is not being conveyed fully, or you are not drilling down on the nuances of your insurance cover, it may well be worth seeking a second opinion.