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Brokers flag uncertainty over bushfire business interruption cover

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Brokers are calling for a review of business interruption (BI) policy wordings following the devastating bushfires that ripped through tourist regions in NSW, Victoria, SA and Queensland.

While BI generally covers loss of income if a business suffers physical damage, there is less clarity over claims relating to evacuations, warnings or lack of access.

Policies vary widely, and many brokers believe the wordings need updating to reflect events of the scale of the current bushfire emergency.

Steve Prince, Director of Ovens Valley Insurance Brokers near Victoria’s Mount Buffalo National Park, told insuranceNEWS.com.au today that while the fires have not reached his immediate area, businesses have still been badly hit by emergency warnings and severe smoke haze.

He says there is particular uncertainty over how insurers will respond to Victoria’s “watch and act” level of advice, which still sees tourists leaving in droves and being told not to visit the area.

“They say it’s advice, but realistically caravan parks are having to tell people to evacuate their parks as part of safety measures,” he said. “I have one client who is down $300,000 over three weeks.”

Mr Prince says a “loss of attraction” clause should be included in policy wordings to reflect the reality of the problems.

“That would really help people with their losses,” he said.

Insurance Advisernet Merimbula MD Kristy Martin told insuranceNEWS.com.au this year’s bushfire catastrophe is “unique”.

“It has affected the whole of the South Coast, with access on every single road restricted during the peakest of peak seasons.

“In Merimbula, with a population of 12,000, we had 60,000 tourists evacuated, taking their money with them.

“The authorities did the right thing; there was no food on the shelves, no petrol, no diesel. But it is a huge loss to our community. The profits are gone. A lot of businesses rely on the four weeks over Christmas to keep them going for the rest of the year.”

Ms Martin, whose business is handling more than 100 claims including total losses, says insurers’ response to BI claims is still unclear.

“We are doing our best for our clients and putting claims in. If they have BI there should be some cover, but we don’t know for how long. Will it just cover the initial evacuation period or until the business is back on its feet?

“We have seen some businesses go under already. Depending on the response from insurers, lots more could close down, which would be heartbreaking.

“We are also hoping that there are government grants for more than just physical damage.”

MGA’s Kelly Commins, based in Bega in southern NSW, says he’s getting on the front foot for his clients, and insurers are responding “very positively”.

“We have had to manage clients’ expectations – for example, if someone cancels a booking in February or March then insurance is not going to pick that up.

“But we are putting forward positions that are fair and equitable. There may be a bit of a grey area, but the insurers are going out of their way to help.”

Mr Commins, whose business is handling about 170 claims including “massive property damage”, agrees BI wordings may need to be tightened.

“Some of the wording hasn’t had this event in mind – it’s the largest bushfire event in our country’s history as far as I am aware.

“There will be learnings for everybody out of this.”

National Insurance Brokers Association CEO Dallas Booth says one of the main problems is the huge variation between policies, and there is a need for more consistency.

“One of the outcomes we want to see from this event is consideration of terms and conditions for BI, and whether there should be broader cover for these sorts of situations,” he told insuranceNEWS.com.au.

“Cost is an issue and we will be guided by insurers on that, but it is certainly worthy of further discussion.”

The Insurance Council of Australia (ICA) says a range of BI products are already available, including loss of amenity.

“Product design is a matter for insurers,” spokesman Campbell Fuller said. “They may choose to respond if they identify demand for a product or type of coverage that is commercially sustainable.”

ICA’s latest figures put insured losses from the bushfires at $1.41 billion from 16,380 claims.