We are just a few weeks into the start to the New Year and we have already seen a number of events that will keep insurance claims departments busy.
The bad weather in various parts of the UK may be the norm at this time of year, although the tornado that destroyed a garage in Harrow would not have been foreseen. It is probably no great surprise that we have seen the first case of Ebola in the UK and unfortunately there is a certain predictability to the recent terrorist activity, although it is the manner of the attack in Paris that has shocked the world.
More locally in the south we have had the car transporter, Hoegh Osaka, running aground in the Solent carrying 1400 cars. The salvage operation is still ongoing with the condition of the cargo unknown, although even if undamaged, the way that marine insurance works is for all the cargo owners (or their insurers) to take a proportionate share of the cost of the salvage.
And here in Worthing an attack by 3 men on a lady runner on the seafront caught the eye. Assault may be a fairly common occurrence, but as a keen runner, the concern is that it occurred early evening in a busy well-lit area that is generally deemed safe for solo runners.
All these events, whether local or international simply emphasise the unpredictable nature of life and the need for insurance.
The Paris attack and subsequent events in other parts of France and Belgium have once again brought the threat of terrorism to the fore and from the insurance perspective the lack of cover in many policies. If you had been unfortunate enough to have been caught up in the Paris attack, many travel policies would have been next to useless as they contain little or no terrorism cover and victims would have been reliant on the French health system or our Government.
Given the threat of terrorism in the UK, I have always been surprised at the relatively low take up rate for terrorism cover, when you are talking about a catastrophe that can wipe out a business, although appreciate the chances of an incident locally are hopefully very low. However that may now change (the take up rate that is).
Terrorism cover for property and business interruption has generally only been available from a Government supported scheme (Pool Re) since 1993, which involves the sharing of losses between insurers and the Government steps in if reserves are exhausted.
Despite the threats of recent years, the last claim was the July 7th London bombings in 2005 and with the scheme accumulating £5.5 billion in reserves, the Government has decided it needs more for the risk they are taking. They were only getting 10% of the premium and have demanded 50%.
Pool Re are also facing increased competition from a number of insurers offering terrorism cover, although these insurers do not tend to want to write the target properties in Central London and Pool Re then have the problem of adverse selection, ending up with all the big high risk properties, with fewer low risks properties to provide a balance.
Pool Re have therefore reviewed the scheme and are set to introduce various changes during 2015. In view of the accumulated reserves and despite the Government taking a bigger slice, premiums are not expected to increase and should fall for properties in lower risk areas, particularly for small business.
Many may still feel the risk is so low or if it were to happen it would be a doomsday scenario so they will not be around to worry about it. In reality, whilst a terrorist incident could completely wipe out a locality, those on the fringe will only suffer partial damage and even if you do go up with your business, how about dependents who are hopefully safe elsewhere without their means of support.
Ultimately it is a decision for the business or property owner as to whether to insure against terrorism, but if price has been the issue in the past, it may be worth reconsidering once the changes are announced.