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'Stop stirring up trouble': politicians urged to keep out of BI dispute

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Insurance industry sources have slammed inflammatory comments made by a senior Labor politician who accused insurers of leaving SMEs “in the lurch” by denying coronavirus-related business interruption (BI) claims.

As reported yesterday, the Insurance Council of Australia and Australian Financial Complaints Authority have agreed to file a BI test case in “a superior court” to seek a ruling on outdated policy wordings and other matters.

Many Australian insurers’ policies still include exclusions referring to the now repealed Quarantine Act 1908, which was replaced by the Biosecurity Act 2015. As a result, some claimants hope the exclusions will not apply to COVID-19 claims.

Today Shadow Assistant Minister for Financial Services Matt Thistlethwaite released a statement welcoming the test case and urging the Morrison Government “to ensure large general insurers are doing everything possible” to help SMEs.

“Labor understands the frustrations of many SMEs that have been left in the lurch by their insurers after business interruption claims were rejected,” the statement said.

“The outcome of the test case will provide further certainty for loyal small business customers that have paid their premiums but been denied payouts when it counts.

“Labor is concerned that insurers refusing to do their job could impact the viability of SMEs and lead to further job losses across the nation.”

But industry insiders have reacted strongly to the comments, describing them as ill-informed and unnecessary.

They resent the “simplistic” implication that just because premiums have been paid, all claims should be accepted regardless of coverage limits.

“In the middle of a health and economic crisis, if politicians haven’t got a positive contribution to make then maybe it’s better to say nothing,” one source told insuranceNEWS.com.au.

“That would be better than trying to stir up trouble between stakeholders. No-one really needs it and it’s transparent political point-scoring.”

Another source described the statement as the start of an “inevitable pile-on”.

The industry says if insurers were to pay out all coronavirus-related claims regardless of pandemic exclusions, then many could be forced out of business.

“Is having insolvent insurance companies going to help us through this pandemic?” one source asked.

“The business model of insurance doesn’t work where most policy holders have a claim at the same time.

“Expecting insurers to pay [all pandemic-related claims] just demonstrates total ignorance of how insurance works.”