Coronavirus Highlights Need to Understand Your Insurance Cover

23 March 2020 - Elizabeth Nichols

Reported cases of Coronavirus (COV­ID-19), first reported in Wuhan, China on December 31 2019, have reached pandemic levels, with 48,010 labora­tory confirmed cases detected in 25 countries as of February 14 2020, and 1383 deaths1. But it is the epicentre of the outbreak, in China and Hubei province in particular, which is affect­ing not just human health but global trade too.

China is a world manufacturing leader and global supply chains are often reliant on products or components coming out of the country. Facto­ries across China remained closed in mid-February2, with workers not allowed to return from Chinese New Year holidays, as a virus containment strategy by the Chinese government.

Production of everything from car parts to hockey sticks3 was already affected by mid-February. Big names such as Nissan and Apple had seen supply chains disrupted, while major trade shows were cancelled. Mean­while, the world’s travel market has took a hit, with a ban on tour groups leaving China. In 2019, Chinese visitors made 150m trips and, in 2018, spent $130bn4. Chinese visitors to the UK numbered 391,000 in 20185. The belief is that the impact of Coronavirus on world travel will last a year, leaving numerous UK hotels short on their bed-nights filled projections.

With so many different sectors affected by what the World Health Organisation has described as a global health emergency6, many businesses will be wondering what insurance, if any, they have in place to cover supply chain disruption, possible impacts on their overseas markets and more. Those with Business Interruption (BI) insurance may believe they are entitled to make a claim but that may not be so.

Many BI policies require physical damage of assets to have occurred – the “material damage proviso” – before they will consider a claim. Health and injury to people is not generally considered a valid reason for a claim. Additionally, any policy bought in the UK may have a territorial limit and not apply to China or other overseas countries affected. Whilst the costs of flight cancellations to and from China, or hotel rooms and other travel expenses, may be picked up by a travel insurance policy, the eligibility of a claim made under a BI policy may well be uncertain.

BI policyholders would be wise to liaise with their broker and assess exactly what can be claimed and what cannot. There could be a Notifiable Infectious Disease exclusion in the policy and, whether or not a claim can be made, may be a matter of assess­ing whether the loss occurred before Coronavirus became a notifiable disease. Since the SARS outbreak in 2003, various policies have excluded diseases as the basis for a legitimate claim7.

The picture is complicated, as the world, and China, seeks to react to this unanticipated outbreak of a previously unknown disease. The longer the outbreak continues, the bigger the impact on the supply chain will be, with sectors such as tourism, transport, pharmaceuticals, electronics and luxu­ry goods all hit, to name but a few8.

Some businesses may need to find alternate suppliers9 or change product lines. Others may find them­selves without anticipated orders or payments, with impacts on trade and cash flow. Again, a broker would need to advise a client holding Trade Credit Insurance, whether or not that could assist with payment issues resulting from Coronavirus.

The incident outlines the need for a business to understand the covers they buy as protection, rather than assuming they will be covered for situations that occur in the trading world. There are BI policies that will provide cover on a wider basis than most and which do not require the insured’s assets to have been damaged10. A broker is well-placed to guide businesses through the insurance terminology, crystallising what they are and are not buying and explaining the exposures that could occur, of which a client may not be aware.

The advice at present is to review any policies in place, seek expert help, consider buying protection that could provide assistance going forward and to review any contracts held with suppliers or customers, to assess who is legally bound to do what. Until an end to Coronavirus is in sight, this will be an advisable route for businesses to take.



























Related news

Get in touch for forward-thinking, impartial advice

With offices in Bury St Edmunds, Cambridge, Colchester, Diss and Ipswich, we’re close enough for personal meetings with clients from anywhere across the East of England. Got something on your mind? We’ll be happy to listen and give you our thoughts.

Call us on 0330 058 6559
Email us at

Get in touch