Who reads the small print?

but it was only early June and the insurance protection relating to the incident is now coming under scrutiny.

Firstly, (at the time of writing) the Government have yet to officially declare the attack as an act of terrorism, but assuming they do, it means that damage and business interruption arising from the event will not be covered by most conventional insurance policies, unless separate terrorism cover was arranged. This is usually with Pool Re, the Government backed scheme, although a few specialist insurers also offer terrorism cover.

Some of the businesses affected by the attack did not purchase terrorism cover and now, aware of the terrorism exclusion, are making complaints about the ‘fine print’ in insurance policies, even though cover was restricted in 1993 and completely excluded from 2001.

They could get lucky if the attack is not deemed terrorism (so the exclusion will not apply), but with the PM calling the incident a ‘brutal terrorist attack’, and the previous Manchester and Westminster attacks classified as terrorism, this seems unlikely.

What the incident has also uncovered is a problem with the wording of the Pool Re policy. This currently requires damage to property in order for the business interruption coverage to operate, however, as much of the area was shutdown by Police after the incident, many businesses suffered loss of trade, even though they did not suffer any damage to their property.

Pool Re have reacted quickly, saying that they will close this gap in their policy wording and have also indicated that claims by businesses that have purchased terrorism cover will not be rejected because of the loophole.

So whilst the Pool Re problem will hopefully be rectified without customers losing out, there is still the problem of how the insurance industry notifies their customers of what is and isn’t covered by insurance policies.

Since the Financial Conduct Authority (and predecessor) came into force in 2005, we have had to continually increase the amount of information provided to customers when they buy or renew an insurance policy so that they can make an informed decision. Nowadays, there can be a bombardment of paperwork to include demands and needs statements, terms of business agreements, statements of fact, policy schedules, summaries of cover, policy wordings etc etc

Insurers never used to issue the full policy wording until the policy was incepted, but instead had to supply summaries of cover outlining significant exclusions, but any exclusion becomes significant if an excluded event occurs, however unlikely, so most now send the whole policy even though they know the many customers won’t read it.

The exclusion of terrorism (and hopefully the availability of cover) would be in the information, but it’s lost in the bumph. The Financial Conduct Authority now accept that too much information is being provided and few read it, but have yet to really come up with any substantive alternative to reams of paperwork.

I may be ‘old school’, but using an insurance broker that you trust to point out cover options and exclusions seems to work quite well.