Lockton Cos. and wholesale broker Burns & Wilcox Brokerage have joined the Ebola-sensitive insurance protection movement with a product that protects companies from income losses and increased costs incurred without actual physical damages.
The companies have launched the Protection Against Income Disruption (PAID) insurance program to address coverage gaps under a standard property policy, says Jared Mitilier, senior vice president and Gaming, Entertainment & Sports Practice Leader for Lockton.
While a traditional business interruption policy may cover named perils (i.e., disease outbreaks), mass shootings or civil commotions, it requires a physical loss—property damage due to a fire or windstorm, say—to trigger a claim. PAID provides an all-risk policy form for numerous causes of loss such as an Ebola outbreak, political unrest leading to riots, mass shootings, food borne illness, natural catastrophes and other factors, and doesn’t require any physical loss or damage, he says.
Mitilier calls PAID a “game changer” for the industry.
“It’s the advent of a new product development line, like D&O and cyber liability,” he says. “This will become potentially a new standard of insurance coverage that will be purchased along with a standalone property program.”
The policy is triggered by any causes of loss beyond the control of the insured. Trigger mechanisms include but are not limited to the occurrence of any crime (i.e., mass shootings, murder or suicide); loss of satellite signals; civil commotions; and the outbreak of disease.
“A BI policy may have specific names for the cause of loss or a named peril, but it’s not an all-risk form,” Mitilier says. “There’s a tremendous demand coming out for this product. Clients and prospects have been asking for several years with all the turmoil and chaos going on around the world right now.”
PAID offers different deductible options and a 24- to 48-hour waiting period depending on cause of loss, Mitilier says. “It mirrors what’s being done in the property area.”
It’s available to businesses regardless of industry or company size, and can be customized with limited exclusions to meet a client’s needs. The policy is triggered by a voluntary or involuntary partial closing of premises, or entire closing, beyond the control of the insured, unless it’s specifically excluded, he says.
Exclusions include nuclear, chemical, biological or radiation cover and terrorism cover (which can be bought back); financial cause of loss (bankruptcy); physical loss or damage to the property; and cyber liability or cyber exposure.
Inclusion of terrorism insurance would depend on renewal of the Terrorism Risk Insurance Act (TRIA), which is now scheduled to expire at the end of the year. Congress is scheduled to resume after the Nov. 4 election. In any case, “Most insureds will have their own terrorism program,” he says.
Verifying a loss under the program is similar to the claims process under a BI policy, he says. The client submits a claim, which then goes through a loss adjuster and the company’s forensic accounting and claims teams.
Retail brokers interested in PAID may access Burns & Wilcox Brokerage in addition to Lockton. “We’re opening this up to all brokers. Access is usually limited to clients,” Mitilier says.
The product launched this week after having been in development for about 6 months, he says. Interest has already been noticeable.
“We’re getting a tremendous number of submissions in from multiple industries: health care, real estate, hospitals, gaming clients, public entities, and schools, colleges and universities,” he says.
The brokers are keeping the submission process “as simple as possible,” Mitilier says. Clients need only a paid application, a statement of values, any claims for last five years, and a copy of the insured’s property policy. “We’re trying to keep it very simple to solve complex problems.”
The period of indemnity is 365 days, the usual length of an insured’s policy, he says.
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