OPINION: Coronavirus: are retailers covered by their insurance? – Steve Denham

Retailers need to check their insurance to find out whether they will be adequately covered for loss of stock during the coronavirus pandemic.

During the coronavirus pandemic there has been one form of insurance policy that has regularly been covered in the media – travel insurance. With holiday and air travel curtailed, trips have been cancelled and many people have found their insurance policy doesn’t cover them for this type of disruption.

I have been receiving regular emails from my insurance broker that have been sent to keep me informed about my own commercial policy. Insurance companies are using statements like this: ‘Neither standard Business Interruption policies nor those with a Notifiable Disease extension would cover losses incurred by non-essential businesses after the wider government restrictions, as those losses are not incurred as a result of an insured risk under the policy.  

‘Customers who have a Business Interruption policy with a Notifiable Disease extension may however be able to claim for certain losses suffered after Covid-19 was declared a notifiable disease (5 March in England), but prior to the wider government action to close non-essential businesses on 23 March.’

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The experience for the independent convenience stores sector has been mixed with those that are in residential neighbourhoods experiencing a rise in customer demand, while those in town or commercial centres have closed, along with the other shops and offices.

There are insurance policy challenges for all retailers as a result of the pandemic. The above statement is no doubt of concern for those who have had to suspend their physical store operations and the NFRN Hardship Fund is helping many who are struggling to keep the business alive.

At the other end of the scale, the stores that have experienced a leap in sales need to consider the value of the extra volume of store they may be holding to meet the demand.

Their policies may have an increase for the traditional periods of stock increase like Easter and Christmas, but are unlikely to cover the current situation. If the Insured Value of Stock covered by your policy is less than you are carrying on a current day-to-day basis, your insurer will deem that you are taking part of the risk. If your policy has an insured stock value of £15,000 and you now are carrying £25,000-worth of goods you are effectively covering 40% of the risk yourself.

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If there is a calamity in your business and have to make a claim while you are underinsured, you will leave yourself vulnerable to not having your claim settled in full by your insurer, even if it is less than the current insured value shown in your policy document.

I advise retailers to check their insurance for their stock on their policy today. If it has increased due to demands of your current level of trade, contact your broker or insurer and advise them of your current stock value.

Find out more on our coronavirus information hub for retailers