Insurance

COVID-19: Indian traders’ body demands insurance cover for disrupted business and loss of income

By Anoop Khanna

The Confederation of All India Traders (CAIT) has sought a mandatory insurance cover for business disruptions and loss of income from pandemics like COVID-19.

In a letter addressed to Indian finance minister Nirmala Sitharaman, CAIT said, “It is pertinent to note that (non-damage) business interruption insurance available in other countries covers loss of income suffered by a business as a result of disruption to their operations.”

Seek cover for (non-damage) disruptions and loss of income

India Abroad News Service (IANS) reported that CAIT has sought advice from the Insurance Regulatory and Development Authority of India to mandate the Indian insurers to introduce coverage for (non-damage) disruptions in business due to coronavirus.”

CAIT secretary general Praveen Khandelwal said some restaurants, educational institutions, cinema halls, gyms and other service-oriented businesses have been shut temporarily as precautionary measures.

Indian authorities in many states have ordered a shutdown of cinema halls, gyms, shopping malls, schools and colleges until 31 March 2020 to manage social distancing following the outbreak of coronavirus pandemic in India.

Mr Khandelwal said, “Both trade and MSME sectors are likely to suffer negative economic impact as many industries and trade may end up closing or face disruption in supplies, cancellation of events, contracts and travel among others and each of these has significant associated costs including loss of income.”

Conventional fire and catastrophe risk policies do not cover

CAIT national president B C Bhartia said, “While traditionally, businesses and traders in India have viewed fire or natural calamities as the major common risks and have taken cover for those risks and some have also taken covers for loss of profit or business interruption coverage too. However, all these covers kick in only for losses that arise out of fire, related risks and material damage.”

Mr Bhartia said, “None of these policies compensates for losses arising out of interruption in operations and extra expenses to keep the business running during the disruption due to the pandemics like the present one. Also losses arising out of supply chain disruptions or a forced government shutdown of a covered facility or event and travel disruptions related to the coronavirus are not covered.”

Insurers say difficult to offer

Indian insurers, however, are unable to provide any complex insurance covers for business disruptions, including loss of revenue, due to the coronavirus pandemic.

ICICI Lombard General Insurance chief underwriting claims and reinsurance Sanjay Datta speaking to the Indian financial daily The Hindu BusinessLine said, “In India, there is no sophisticated cover for non-damage business disruptions. You don’t get cover for business interruptions unless you show loss of property.”

He said, “Also, there are no specific insurance products that cover economic downturns. There are no products or covers available in India for ‘loss of income’ situations linked to shutdowns arising from global events such as the coronavirus pandemic.”

The Hindu BusinessLine said, “Indian general insurers find it difficult to offer cover for loss of income to traders on account of coronavirus, although it is now declared as a pandemic by World Health Organisation and India has invoked both Epidemic Act and National Disaster Management Act.

“Even companies in India that had suffered from supply-chain disruptions arising from overseas markets, cannot get compensation in India.”

Asia Insurance Review

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