BI claim numbers low as test case outcome awaited

Pandemic-related business interruption claim numbers have remained well below early expectations as the outcome of the second industry test case is awaited, the National Insurance Brokers Association (NIBA) convention has heard.

Gallagher Head of Claims Adam Squire says the industry prepared for a “massive influx of claims” that hasn’t occurred, with government supports perhaps playing a role, but he notes the area remains “very litigious”.

Marsh Managing Principal Ken Wise says the broker has seen “nowhere near” as many claims as expected, with numbers in the hundreds rather than in the thousands, contrasting with UK experience, where a Financial Conduct Authority (FCA) test case was decided in favour of insureds early last year.

“Now we are seeing across Marsh tens of thousands of claims in our client base there, and already the industry in the UK is estimated to have paid out about £1 billion ($1.9 billion) worth of insured losses from covid, so a very different situation to what has occurred here in Australia,” he told the Perth leg of the NIBA convention yesterday.

The Insurance Council of Australia first test case on exclusions citing the Quarantine Act went in favour of policyholders, while the second test case mostly favoured insurers. An appeal was heard in November, with a decision expected soon.

Mr Squire says second test case outcomes are likely to be appealed to the High Court in a process that could continue through this year.

The court processes have moved rapidly in legal terms and the industry has worked to ensure claims can be handled quickly once decisions are known, he says, but in hindsight it may have been better to run the two test cases together, while there may also be lessons from the UK process.

“Here, we are two years on, and we are still waiting for these decisions,” he said

Since covid emerged, policy ambiguities have been tightened but wordings and contract law remain complex, the convention heard.

Separately, law from the test cases is likely to be applied to a number of class actions that have been adjourned until after the appeal verdict is released, Mr Wise said.

The UK business interruption appeal decision was handed down by the Supreme Court on January 15 last year.