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Business continuity insurance not on offer - It’s too difficult to price, says IAJ spokesman

Published:Friday | March 20, 2020 | 12:00 AMNeville Graham - Business Reporter
Sharon Donaldson, managing director of General Accident Insurance Company Limited.
Peter Levy, president of the Insurance Association of Jamaica and managing director of BCIC.

B usiness continuity insurance will not cover Jamaican companies in the event of losses arising from the effects of the COVID-19 coronavirus.

That’s the word from the general insurance sector, while businesses contemplate the likely fallout from forced absence and low productivity as they scale back to mitigate the spread of the virus.

But as for health insurance consumers, the two largest insurance groups, Sagicor Life and Guardian Life, have been advising that the illnesses associated with COVID are covered. Persons with the disease suffer flu-like symptoms and may contract pneumonia.

However, for the business sector, Peter Levy, president of the Insurance Association of Jamaica, IAJ, says there is no insurance product in Jamaica that can cover the imponderables of what is an unprecedented crisis.

Because the virus is novel and deadly, and there is as yet no vaccine, it has forced whole countries into partial lockdown, including Jamaica, and brought on the cultural practice of ‘social distancing’. For businesses, that means a reduction in walk-in traffic, and therefore lost revenue, as well as the execution of remote work programmes that may come at a cost to companies.

But those risks are not so easy to isolate and quantify.

And: “If we can’t quantify it, we would not be able to price it,” Levy told the Financial Gleaner.

“Insurance needs to be very specific about the type of things that it covers, because it has to arrive at a price which we can charge people,” he said.

Managing Director of General Accident Insurance Company Sharon Donaldson was more direct, saying the ability of individual insurers to offer business-interruption protection is hampered by an industry aversion to the risk associated with diseases.

“Generally speaking, we have the same reinsurers, and the policy that we have excludes losses arising from contagious diseases. The business interruption losses would have to be occasioned from a material damage as you would have in, say, a fire,” Donaldson told the Financial Gleaner.

What that means for the general insurance sector itself, is that their balance sheets will face limited COVID-19 risk. But they may have indirect exposure were businesses to experience protracted fallout and start cutting costs.

Sufficiently inoculated

That’s a future possibility were COVID-19 to take the sort of economic toll that is being predicted, with recession fears already rising in both the United States and Europe, where their coronavirus cases, and deaths, are still on the rise.

But Levy, who also heads general insurer BCIC as its managing director, says the general insurance sector is sufficiently inoculated for now.

“Regarding the industry as a whole, I don’t have any immediate concerns because the balance sheets are generally strong and the investment portfolios, despite recent setbacks, are good; so there are no real concerns,” he said.

Were the economy to slide as the crisis progresses, that would be cause to worry, he added, as some businesses may choose to cut some of their insurance coverage.

“Let’s take, say, a large entertainment company. There are some coverages that they may want to save on in the event that they have no foreseeable revenue coming in for a ten-week period,” Levy said in an oblique reference to the recent decision of cinema company Palace Amusement to suspend operations in light of the COVID-19 pandemic.

Similarly, if demand for public transport falls off due to less commuter volume, then it may be seen as the more sensible course of action to park the taxi and suspend the insurance, he added.

Those types of events would then begin to squeeze revenue for the sector, which has 11 players.

“There might be some reduction in demand that can affect our top-line revenue, but we’d be expecting to ride that out along with the rest of the country, and, hopefully, we’ll recover in a relatively short space of time,” Levy said.

Speaking for his company, BCIC, Levy says they have been encouraging people to use email and online services as much as possible in conformity with social distancing practices.

“We are essentially a public service in that people still need protection for their assets, but to the extent that we can minimise face-to-face contact and do business through other channels, we’re trying to do so,” Levy said, noting that nearly 50 per cent of BCIC staff is working from home.

BCIC’s work-from-home plan, according to Levy, was formulated over two weeks ago when Jamaica’s exposure to COVID-19 began to emerge.

Over at General Accident, Donaldson says her company has a reasonable level of functionality to work from home; and has implemented a shift system and installed work stations in a large conference room as part of its social distancing protocols for staff.

General Accident has also hired two practical nurses, who, Donaldson says, monitor customer traffic and administer a questionnaire that is meant to detect at-risk persons, who are dealt with separately, as part of their virus-mitigation protocol to safeguard the company’s clients and staff.