Covid-19: Understanding the impact on your insurance and key learnings for upcoming renewals

The current pandemic has placed strain on lives and businesses, and its long-term impacts are unclear. Each client’s insurance arrangements will differ, but there is a range of insurance policies that may be triggered by the pandemic. Take some time to remind yourself of the insurance policies you have in place, how they might respond, and what (in a practical sense) needs to be done to ensure you understand expectations on you as a result of Covid-19 or in the event of a notifiable event and/or claim.

Below we set out some key points to consider for policy renewals and complying with current policy requirements. The Howden team is here to assist your understanding of your rights and obligations, and to put you in the best position should you need to make a claim.  Please do contact Howden to discuss any queries you have.

Key Points for Upcoming Renewals

• Renewals are generally taking longer – early engagement with your broker is crucial
• Consider and discuss with us any changes to your insurance demands and needs
• Duty of fair presentation continues to apply – this is more challenging during lockdown
• Insurers may look to add or amend specific Covid-19 exclusions or other exclusions
• Consider notification of circumstances which may or are likely to give rise to claims – crucial if Covid-19 claims are to be excluded going forward for certain insurance classes.

Engage with your broker early in the process

The Covid-19 pandemic commenced at a time when, for some industries, the insurance market had already started to harden. Conditions within the Professional Indemnity, Property, Liability, Directors’ and Officers’ and Crime markets, in particular, were already challenging, with many Insurers seeking to restrict cover, reduce capacity and significantly increase premium rates and/or excesses in response to poor loss ratios, reduced investment income and regulatory scrutiny of unprofitable lines of business. It is quite possible that where Insurers have been exposed to substantial liabilities resulting from the pandemic itself, we may also see a hardening of the market affecting other industries and insurance policy types.

Hard market conditions make it important to engage with us well ahead of renewal. Renewals may take longer to negotiate; acceptable terms may be more challenging to obtain; and Insurers may require you to provide additional information (for example on Business Continuity Planning, Directors’ & Officers’ Renewal Proposals, Premium Finance Applications and Covid-19 related exposure). Prompt provision of information provides the best chance of a smooth renewal process, and will at least allow time for you to consider your options if significant premium increases and additional exclusions are on the table.

Demands and needs

Many businesses are being impacted by Covid-19 in a number of different ways and, as the measures taken by the Government continue to evolve, the way in which businesses are able to operate will also continue to evolve and the risks that they face may now be different and continue to change. It is therefore important that you consider carefully whether your insurance demands and needs have changed and that you continue to have the right type and level of insurance in place, whether this be an increase risk exposure in some areas and a reduction in risk exposure in others. You should discuss with us as soon as possible, any such changes and how this may affect your insurance needs.    

Fair Presentation of the Risk

For policies governed by English law, the duty of fair presentation (as detailed in the Insurance Act 2015) applies throughout the renewal process. In fast-changing market conditions, that means clients should ensure that insurers are provided with the most up-to-date information, even if that requires supplemental information to be provided at a later point.

Covid-19 Exclusions

In certain areas, Insurers have responded to potential pandemic losses by seeking to restrict their exposure going forwards, through the introduction of Covid-19 exclusions or enhancements to existing pandemic related exclusions.  These exclusions can be broad, and as they are untested there may be uncertainty as to their application.  Careful thought will need to be given to how this might affect future claims. 

Notification of Claims or Circumstances

It remains important to ensure that you comply with the notification requirements of your current policies. Steps should be taken well ahead of renewal to assess whether there is anything which may require notification to current year insurers.

It is particularly important to review any policy right or obligation you have to notify circumstances that may or are likely to give rise to a claim.  If Covid-19 related claims are to be excluded from your policy going forwards, your right to notify a circumstance to an expiring policy may provide your last chance to obtain cover for this sort of claim – e.g. especially “Claims Made” Policies which typically relate to Professional Indemnity and Directors’ & Officers’ Liability Policies.     

Care must be taken to ensure that circumstance notifications are as broadly framed as necessary without risking prejudicing their validity, and whilst ensuring compliance with policy terms. Preparing notifications may require significant time to consider potential exposures and obtain additional information. External legal advice may be necessary.  We are well positioned to assist you with this process, and encourage you to get in touch well before renewal.

Ongoing Policy Obligations and Considerations

Outside of the renewal context, there is a range of additional points that clients should bear in mind to avoid prejudicing the insurance position.

• Duty of fair presentation and obligations to report changes during the policy period.
• Identifying, escalating and reporting of claims and record keeping may be more difficult during lockdown – ensure adequate procedures are in place, including fall-back plans if individuals are unable to work.

Your Howden team is available to deal with any queries or concerns that you may have in these difficult times. The team is working remotely but otherwise business continues as usual, so please do reach out to your usual contact in the first instance who will be happy to assist.