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Law360, London (May 14, 2020, 11:54 AM BST) -- A trade body for risk managers has called on insurers to "look favorably on gray-area claims" to help restore trust in the industry, amid growing concern that companies are refusing to pay out on business interruption claims.
The Association of Insurance and Risk Managers in Industry and Commerce said insurers should also consider offering rebates, such as those issued by some motor insurers in the U.K. and U.S. The association said insurers should also avoid "last-minute and poorly communicated changes in underwriting policy."
Focusing only on the balance sheet threatens to cause irreparable to the reputation of the industry and drive customers away, the association said.
"With many corporates facing an existential threat from global governments' lockdown measures, and a deep recession likely to follow, we expect brokers and insurers to demonstrate fairness and flexibility with regards to claims and renewals," the organization said in a statement.
"The harsh market is already straining relations with many corporate clients, and insurers' rigid interpretation of wording regarding the pandemic could accelerate this deterioration," it added.
Business valuation consultancy Brand Finance said last week that insurers could face severe damage to their reputations as a result of their response to the crisis. The top companies risk seeing $100 billion shaved off the value of their brands.
Insurers have come under fire over their rejection of business interruption claims. More than 300 small businesses are mulling legal action against Hiscox over a refusal to pay out, and a separate group has been established under Mischon de Reya LLP to pursue group litigation against other insurers.
The Financial Conduct Authority will take a sample of disputed policy wordings to the High Court in July as it seeks to gain an authoritative judgment on liability.
Many insurers have pulled out of crucial lines of business such as income protection, which guards against loss of earnings in case of redundancy. Price comparison service Compare the Market blocked insurers from continuing to sell the cover on its site after it found insurers that hadn't pulled out had introduced exclusions on coronavirus.
Separately, insurance consultancy Mactavish said it has found that at least five commercial insurers had removed cover from common business lines, while also increasing premiums.
The trend has been mirrored elsewhere, with broker Willis Re saying many reinsurers had amended treaties with insurers at the last minute to write in exclusions over coronavirus-connected claims.
--Editing by Ed Harris.
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