eBusiness Weekly
Tawanda Musarurwa
With the Covid-19 pandemic resurging in recent weeks, amid reports of a more dangerous mutation of the virus, local businesses are still largely ‘uninsured’ from the pandemic.
As at December 30, 2020 Zimbabwe has 13,148 confirmed coronavirus (Covid-19) cases and 354 deaths.
Globally there are 83 million cases and 1,8 million deaths have been recorded over the same period, with a new “more transmissible” mutation of the virus said to be driving the second wave, especially in the United Kingdom and South Africa.
In view of this growing trend, local companies could take another hit from the latest round of infections, as some insurance firms have continued to insulate themselves from respiratory pandemics.
Typically, business interruption insurance — works to indemnify the insured for the loss of turnover and continuing costs as a result of an interruption to the business following damage by an insured peril. This policy will pay during the period of interruption.
But some exclusionary clauses mean that the policy has significant limitations when it comes to respiratory pandemics, for instance.
A number of local insurers have resisted calls by corporates to have them structure policies that address business interruption policies resulting from pandemics such as Covid-19.
“My insurer has maintained an exclusionary cause in my business interruption policy. We thought the pandemic was waning, but here we are again,” said a Harare businessman who preferred anonymity.
Earlier in 2020, Insurance Council of Zimbabwe (ICZ) executive officer Tendai Karonga highlighted that business interruption claims in the sector had not increased significantly due to some of these exclusionary clauses.
“The Zimbabwe insurance industry has not been inundated with claims intimated on Covid-19 as a proximate cause.
‘‘Policies in force when the pandemic was declared did not cover such a risk,” he said in October.
“Most insurers had introduced exclusion clauses for communicable diseases and epidemics or pandemics into most non-life products such as business interruption and travel following lessons from the SARS outbreak of 2003.”
Because of the exclusions the insurance sector has not been as badly affected as largely expected.
But in failing or refusing to restructure their business interruption policies, observers, say insurers are absconding their core function.
And they could lose business to insurers that have shown flexibility and innovation.
South African insurer Old Mutual, for example, has an infectious diseases extension in its BI policies. And in July 2020 pledged to make payouts, although indicating it needed further legal clarification on the specific matter of the country’s national lockdown.
“We will make commercial settlements to compensate our customers with an annual sum insured of R5 million or below, for their BI losses based on specific criteria to enable them to continue operating during this difficult time.
“This settlement applies to all our qualifying SME customers who had the infectious disease extension at the time of loss. We estimate that these financial settlements, combined with already submitted BI claims will amount to over R650 million and will provide settlement for half of the customers with the infectious disease extension,” said Old Mutual.
“Old Mutual Insure is still of the view that a suspicion or the general widespread occurrence of Covid-19 in the area or any steps taken by government, as an example, to limit the spread of Covid-19 nationally, will not constitute an interruption or interference of the business under the infectious disease extension.”
But they also face costly legal battles.
Just last week, two South African insurers Hollard and Guardrisk agreed to pay claims from businesses forced to close during that country’s national lockdown earlier in the year.
The move by the two companies followed a recent South Africa Supreme Court of Appeal (SCA) ruling in favour of the business interruption claim made by Café Chameleon, a client of Guardrisk.
