Government can’t continue as insurer of last resort
More than half of insurance professionals have warned it is not economically sustainable for the government to continue to step in as an insurer of last resort.
A survey of 476 Chartered Insurance Institute members conducted in October showed 54 per cent do not feel the government can continue to provide a safety net for everybody financially affected by Covid-19.
Keith Richards, chief membership officer of the Chartered Insurance Institute, said: “Ultimately, no government can save every business. Coronavirus has acted as a catalyst for some trends (for example, towards online shopping) and the government cannot have a ‘zero failure’ regime that prevents every business from closing.
“However, only the government has the tax raising powers to raise the hundreds of billions of pounds needed to transition to a post-Covid economy in an orderly way, that avoids the kind of suffering that happened, for example, in the 1930s.
“While government cannot be the insurer of last resort for every business and individual, it can offer a wider safety net than insurers can raising money through voluntary premiums.
“The key is for the insurance profession to define roles and responsibilities in a clear and sustainable way, so that investors can have confidence and the economy can rebuild.”
The Chartered Insurance Institute (CII) has urged insurance professionals and the government to focus on three areas to reduce the need for legal proceedings such as the business interruption (BI) insurance test case brought by the Financial Conduct Authority (FCA) in the wake of the pandemic plus to ensure the public are aware of what insurance covers and when the government will offer financial assistance.
The professional body has called for a consensus among professionals on definitions where the same words and phrases are used in different contracts, to reassure consumers that two policies, which “look the same on paper”, cover the same risks.
The CII has also proposed an improvement to advice processes, as well as non-advised buying processes, to help clients understand insurable and non-insurable risks.
The professional body is also calling for an established approach to pandemics and other systemic risks that clearly sets out the scope of government intervention so that consumers can clearly grasp what cover they need to have in place.
