Insurers are expected to pay out up to £2.5billion for UK insurance claims relating to Covid-19, new research has revealed.The Association of British
Insurers are expected to pay out up to £2.5billion for UK insurance claims relating to Covid-19, new research has revealed.
The Association of British Insurance said its members are expected to pay out the vast amount for coronavirus insurance claims incurred in 2020.
The estimates include £2billion for Covid-19 business interruption claims alone.
Business interruption insurance covers firms for loss of income during periods when they cannot carry out business as usual due to an unexpected event, such as the coronavirus.
It is estimated £2bn will be paid out in business interruption insurance claims from 2020
It is also estimated £204million will be paid for Covid-19 related protection insurance claims, including life, critical illness, and income protection insurance claims.
Many of the life insurance pay outs will support families who have lost loved ones due to the coronavirus.
A further £152million is expected to be paid on travel insurance claims as millions of holidaymakers were left with their trips cancelled.
Another £121million is estimated to be paid across other general insurance products, including events, weddings, and liability insurance.
Of these claims, 123,000 claims have been settled with payment whilst a further 9,000 have received partial payments as of mid-January 2021.
This has equated to £697million being paid out for these claims as of the same time.
In addition, Lloyd’s previously estimated a £500million cost of UK Covid claims, taking the current overall estimate up to £3billion for UK Covid insurance claims.
Huw Evans, the ABI’s director general, said: ‘The Covid-19 pandemic is unprecedented in its impact and will be one of the biggest insured events of recent times.
‘These latest estimates demonstrate the range of support ABI members expect to offer their customers as a result of Covid-19 related claims across a wide range of insurance policies.
A further £152m is expected to be paid on travel insurance claims due to cancelled trips
‘However, we recognise the pandemic has also illustrated some uncomfortable gaps between what people expected to be covered for and what their policy was designed for.
‘We need to learn lessons from this unprecedented event and redouble our efforts to improve consumers’ trust in insurance products.’
The data was collected from individual firms by the ABI in mid-late January with millions of pounds continuing to be paid out every week in claims settlements.
It was revealed in December that pledges by members of the ABI to support both those working from home due to the pandemic and drivers have been further extended until 19 March 2021 – one year on since they were introduced.
The continued support is there to help the UK’s 17million home insurance policyholders and 27million car insurance customers as the impact of the pandemic continues to be felt across the UK.
As such, those who are an office-based worker currently working from home, their home insurance cover will not be affected.
Motorists having to drive to and from their workplace will find their insurance policy is also not affected.
Neither need to contact their insurer to update their documents or extend their cover.