UK riots: Home and business insurance: Are you covered?
By Ben Salisbury
The unprecedented scale of the riots in London and other major cities in the UK has left parts of the country resembling a battlefield and residents and the authorities are fearful of what to expect tonight.
David Cameron and other senior politicians have returned from their holidays and after a meeting of the COBRA security force this morning, David Cameron has announced that 16,000 police will be patrolling the capital tonight in a bid to stop the riots and looting.
Nick Starling, the Director of general insurance at the Association of British Insurers has urged all individuals and businesses affected by the rioting to contact their insurance companies as soon as possible.
But many residents and businesses are unsure of where they stand in terms of cover for the damage to property and theft or destruction of goods and personal property. So, where do you stand if you are a business, homeowner or an individual affected by the riots?
The Association of British Insurers has said today that most households and business owners whose property has been damaged or destroyed by rioters should be covered by their insurance policies. The body says that home insurance policies should cover damage and loss caused by fire and looting and that the cost of alternative accommodation is likely to be covered.
Business owners who have commercial policies should also be covered for damage to property and loss of goods from looting. Additionally, most policies will provide a pay-out for loss of trade.
ABI has urged all those affected to get in touch with their insurance companies as soon as possible.
Emergency help
Individuals and businesses who do not have insurance are likely to face losses, though some help may be available from local authorities and charities, especially for those who cannot go back to their homes for the time being. Crisis loans are available for those who have to cover short-term costs. These loans will be repayable but won’t have interest charged on them.
The cost to insurers
Mr Starling said that it is too early to assess the full cost to insurers but he expected it to run into tens of millions of pounds. Many other commentators expect the full cost to be a lot higher than this and likely to be in the hundreds of millions of pounds bracket. This will also depend on whether there is more rioting over the coming days and weeks.
Insurance incident response teams are assessing the damage in some areas, though that is not possible in all areas affected as police are still treating certain sites as crime scenes and searching for evidence. Fire-fighters are also still dousing flames and attempting to bring fires under control at this time.
Mr Starling said in a statement released by the ABI: “We have every sympathy for residents and business owners who have suffered damage to their properties. This is a time of enormous stress for them and their insurers will be on hand to answer any questions that they may have. Home insurance should cover people for fire, looting or damage caused."
"Many policies will also cover people for accommodation costs if they can’t stay in their home. Most commercial insurance policies will cover businesses for damage to their premises, including the interruption to their business as a result.
"It is important for people to contact their insurer to check what they are covered for and arrange for immediate help."
Who foots the bill?
The full cost to insurers depends partly on whether the disturbances are classified as “civil unrest” under the terms of the riot act. If that is the case then insurers could recoup their costs from a special police fund.
Otherwise, many commercial insurance policies will cover losses to businesses. However, the definition of disorder does not affect whether individuals or businesses are covered. This only impacts on how insurers will be able to claim back costs from the authorities.
Steve Bartlett, head of household at Gallagher Heath Insurance Services said: “Just been told that any member of the public who wishes to make a claim against the police (if it is declared a riot by the Home Office) have to make it within 14 days.
“Standard household policies will cover damage as a result of riots, such as those we are currently seeing. There is no variation by region.
“For example, our policy covers loss or damage caused by “Riot, violent disorder, strike, labour disturbance, civil commotion or malicious acts”. The only specific exclusion for this cover is if the property is unoccupied.
“Cover for theft from individuals whilst they are away from the home will usually depend on whether they have taken the optional additional cover on their policy (previously termed “All Risks” but now more usually termed “Valuables and Personal Possessions Away From the Home”).”
Emma Banks from LV said: “LV= car, business and home insurance customers are covered against any damage to their properties or vehicles. Anyone who has been affected should contact us straightaway and we will make the relevant arrangements.
“Those home insurance customers who have been made homeless as a result of damage to their property will be re-homed immediately. Business customers will be covered for property damage, loss of stock, loss of earnings and making the property safe and secure.”
UK riots and insurance Q&A
I spoke to Richard Cowling, head of property at Gallagher Heath and asked him some frequently asked questions about how businesses and individuals are covered through their insurance policies:
Will business owners be covered for damage to their property?
Yes, if they have 'full perils' cover which includes Riot, Civil Commotion and Malicious Damage.
Are there any variations in cover over different regions?
Not for this type of eventuality
What are the most common exemptions in cover for riot-related damage?
Only the excess. For Riot to be the insured peril, police must declare a riot. However, if a riot isn't declared it will come under Civil Commotion or Malicious Damage
Will businesses be covered for the theft of goods from their premises?
All businesses are covered for theft.
Mohammad Khan, a partner at Price Waterhouse Cooper (PwC) commented on the impact of the riots on future insurance costs for those affected.
He said: “It’s difficult to put a value on the cost of the damage as the scope and scale is still changing but, in relative terms, the financial impact on insurers will be small. There may be some specific increases in premium for the worst affected areas but, for customers nationwide, there is also too much competition for these events to have a significant impact.
“The key issue is how quickly insurers can deal with claims as many small businesses may not have the cashflow to survive without quick payments and more will not have business interruption insurance. The UK property and casualty insurance industry has learned lessons from previous events, such as floods, and now recognises it can demonstrate value and earn customer loyalty by processing claims quickly and efficiently.
"Customers may have to check the wording of their policies carefully. Generally events like riots are included within the terms of insurance but there may be exceptions to this.”
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