Insurers Warned To Close Expectation Gaps On Policies

By Martin Croucher
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Law360, London (June 11, 2021, 3:36 PM BST) -- A global insurance think tank has called on insurers to simplify policy wording in the aftermath of the COVID-19 pandemic, following a wave of legal disputes last year on the scope of coverage.

The Swiss-based Geneva Association said in a report Friday there was a growing gap between what the industry is willing to insure and what customers believe their policies should cover.

The recommendations come after legal disputes across the U.K. and Europe, as companies sought to challenge insurers over a refusal to pay up for pandemic-related losses under their business interruption cover.

"COVID-19 has demonstrated that the economic losses from a global pandemic are uninsurable," the report said.

"In order to avoid false expectations, insurance contracts have to be much more simple and accessible so that customers know which risks are covered," it added. "This will require insurers to clearly communicate what they promise and keep their part of the bargain."

The comments were echoed by Allianz chief executive Oliver Bäte, who was quoted in the Geneva Association report as saying insurers needed to overcome an expectation gap.

"For some risks, there is a gap between what insurers are able to insure and what clients and society expect us to cover," he said.

The wide-ranging report, which looked at the future of insurance after the pandemic, was based on a 2021 survey of 25 insurance bosses and 8,000 customers across Brazil, China, France, Germany, Italy, Japan, the U.K. and the U.S.

It found that while 100% of commercial customers in Japan and China said their insurance coverage worked as expected, that number fell to 62% and 59% in the U.K. and France, respectively, reflecting the impact on sentiment of coverage disputes.

In the U.K., the Financial Conduct Authority initiated a legal test case on behalf of an estimated 370,000 business interruption policyholders. In France, there have been multiple suits against insurers, such as AXA, over a refusal to pay claims related to government-ordered lockdowns.

--Editing by Alyssa Miller.

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