Australia’s QBE was one of the defendants in a British High Court ruling, seen to favour policyholders, over whether insurers will be on the hook to pay out business interruption claims linked to the coronavirus pandemic.
UK’s Financial Complaints Authority claimed victory in the case which, if justified, would be a big win for consumers and would actually mean an insurance policy is worth something.
However in the UK the stock prices of some affected insurance companies rose strongly, with Hiscox up 17 per cent and Royal & Sun Alliance Insurance up 4.7 per cent.
QBE said it had won some and lost some in the case but repeated an earlier note that as it was covered by reinsurance the worst outcome would be a $70 million fall in profit. If it didn’t have reinsurance the worst would be $170 million.
In the scheme of things, that‘s barely lunch money and QBE’s stock price was down a touch at $9.24 a share on the news.
The bottom line is that the market feared the worst from the case but realised even a loss was not the end of the world, because exposure was limited.
The case centred on policy cover for infectious diseases and forced business closures.
The FCA was hoping the case would show businesses forced to close due to COVID-led government decisions would get some compensation through their insurance.
It was partially vindicated.
On the business closure issue the insurance industry is claiming victory and on the disease front it‘s a mixed bag.
QBE noted it was looking at the judgment to work out whether to lodge an appeal.
The judgment has raised some issues but these were not considered too bad for the industry.
It was also regarded as a complex decision.
For consumers the lesson is to make sure you understand your rights when you take out insurance, because having lived through bushfires and a pandemic their expectations may be disappointed.
The question then is whether insurance is worth it, but that is something for the industry to work through.
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