IRMA TESTS STRENGTH OF IN­SUR­ANCE SEC­TOR

Losses to prop­er­ties in Texas alone will be US$65b to US$75b, says risk agency

New Straits Times - - Business / World -

BUSI­NESS own­ers who are try­ing to get back on track after hur­ri­canes Har­vey and Irma now face a dif­fer­ent sort of chal­lenge: try­ing to re­coup lost in­come from their in­sur­ers.

Ex­clu­sions in the fine print of poli­cies, along with wait­ing pe­ri­ods and dis­agree­ments over how to mea­sure a firm’s lost in­come, make busi­ness in­ter­rup­tion claims among the trick­i­est in the in­dus­try.

“I think the whole thing is a ripoff,” said Thomas Arnold, an op­tometrist in Sugar Land, Texas.

He said his busi­ness, Today’s Vi­sion, was shut­tered for al­most five days after Hur­ri­cane Har­vey struck be­cause nearby flood­ing kept em­ploy­ees and pa­tients from get­ting there.

Arnold said he paid US$1,083 (RM4,537.27) per month for cov­er­age. But after he filed a claim, he said the US unit of Zurich In­sur­ance Group AG, re­jected it be­cause his busi­ness was not phys­i­cally dam­aged.

Zurich In­sur­ance does not com­ment about spe­cific claims, said the com­pany. It added that busi­ness in­ter­rup­tion cov­er­age gen­er­ally re­quired “di­rect phys­i­cal dam­age” to a prop­erty for a pay­out.

Dev­as­tat­ing storms are hit­ting the US with in­creas­ing fre­quency. Risk mod­el­ling firm AIR World­wide pre­dicts losses to all prop­er­ties from the flood­ing in Texas alone will be US$65 bil­lion (RM272.3 bil­lion) to US$75 bil­lion, re­gard­less of whether they are in­sured.

The in­come lost by shut­tered firms makes up a sig­nif­i­cant chunk of over­all losses from a nat­u­ral dis­as­ter and can hob­ble the pace of a com­mu­nity’s eco­nomic and so­cial re­cov­ery.

Hur­ri­cane Ka­t­rina in 2005, for ex­am­ple, caused about US$25 bil­lion in in­sured com­mer­cial losses, of which US$6 bil­lion to US$9 bil­lion has been at­trib­uted to busi­ness in­ter­rup­tion, said AIR on its web­site.

The Na­tional Flood In­sur­ance Pro­gramme (NFIP) does not of­fer a busi­ness in­ter­rup­tion com­po­nent. The pro­gramme is used by home­own­ers, but it also cov­ers com­mer­cial struc­tures for up to US$500,000 in dam­age, with an­other US$500,000 for the con­tents.

That is why com­pa­nies able to af­ford the ad­di­tional pro­tec­tion of busi­ness in­ter­rup­tion in­sur­ance, usu­ally large and medi­um­sized firms, of­ten pur­chase it de­spite the po­ten­tial for un­suc­cess­ful and drawn-out claims.

“In­sur­ers are crav­ing in­for­ma­tion now,” said Ernst & Young LLP leader in­sur­ance claims (Amer­i­cas) Allen Mel­ton.

“They want to know how big a claim we are look­ing at and what the is­sues are.” Reuters

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