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Law360, London (February 22, 2021, 2:39 PM GMT ) Insurers expect to fork out up to £2.5 billion ($3.5 billion) for COVID-19 claims incurred in 2020, the sector's trade body has said — double the £1.2 billion total predicted last April.
The Association of British Insurers said that it expects large payouts for a range of cover, such as business interruption, travel and events insurance.
A major part of the estimated payments — £2 billion — will go toward pandemic-related claims for business interruption, the ABI said on Saturday. The vexed matter of this cover has gone all the way to the Supreme Court.
The breakdown of the bill also sees protection insurance payouts linked to coronavirus reaching £204 million, which is attributed to claims for life, critical illness and income protection cover. A further £152 million will be spent on travel insurance claims, the trade group said.
Huw Evans, the ABI's director general, said the insurance sector has also provided support to people whose family members have succumbed to the virus.
"However, we recognize the pandemic has also illustrated some uncomfortable gaps between what people expected to be covered for and what their policy was designed for," Evans said. "We need to learn lessons from this unprecedented event and redouble our efforts to improve consumers' trust in insurance products."
So far, 123,000 claims have been settled and a further 9,000 had received partial payments by last month, according to the ABI, whose data was collected from individual companies.
The £2.5 billion figure could go up to £3 billion if an estimated £500 million in claims from insurance marketplace Lloyd's of London is included, the ABI said.
How much businesses expect to pay out will vary, depending on factors such as the emergence of new claims and the Supreme Court ruling on insurance for business disruption, according to the industry group, which represents more than 200 companies, including leading insurers and specialist providers.
The Supreme Court ruled in January 2021 that insurers should make payouts to hundreds of thousands of companies forced to close during the country's first pandemic lockdown. The landmark decision came after more than more than six months of litigation.
"There also exists a degree of uncertainty over classification of claims as 'COVID-19 related'," the ABI said on Saturday.
Across the Irish Sea, the Central Bank of Ireland said on Feb. 17 that it will continue to examine how insurers deal with business interruption payouts linked to COVID-19 following the court's decision.
--Additional reporting by Martin Croucher and Lucia Osborne-Crowley. Editing by Joe Millis.
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