Home / Daily / Law firm clarifies COVID comments after ‘intense debate’
15 July 2020
Sparke Helmore has issued a statement to clarify comments suggesting some Australian insurance businesses will go to the wall as a result of the COVID-19 pandemic.
As insuranceNEWS.com.au has reported, the stark prediction was contained within a report by Global Insurance Law Connect, an alliance of legal firms, for which Sparke Helmore provided the Australian commentary.
“It is almost certain that we will see insurance businesses fail, and quite possibly in significant numbers,” the report says.
The firm told insuranceNEWS.com.au that small, specialist brokers or underwriting agencies could be most at risk.
But Steadfast MD and CEO Robert Kelly responded by saying the comment was “the most erroneous statement I have seen anyone make about insurance” and that it was not backed by evidence.
National Insurance Brokers Association CEO Dallas Booth also questioned the statement saying brokers are not currently under stress – and now the Underwriting Agencies Council (UAC) has joined the backlash.
Sparke Helmore today issued a statement to insuranceNEWS.com.au, acknowledging the "intense debate" caused by coverage of the report.
It says the report - which was launched last week - was written in late March when COVID-19 was “hitting the world and Australia in earnest”.
“At that point in time, predictions around potential impacts on many industries including the insurance sector, were concerning,” it said.
“The observations included in the report were based on those predictions and informed by anecdotal feedback from, as well as conversations with, a number of leading industry participants.”
However, it admits that “as we stand today, the severity of those predicted impacts has not yet come to pass in this country”.
“The insurance industry has been resilient and focused on compassionate support to those customers in the community experiencing financial hardship,” it said.
Today’s statement does warn that “impacts could still play out in the travel, life, health, event cancellation and business interruption classes”.
“The coverage issues arising in the latter are complex, and we have already seen litigated coverage disputes in several jurisdictions, particularly the US and parts of Europe.
“In fact, business interruption claims are on the rise and in reasonable numbers and coverage disputes in Australia are inevitable – and it is fair to say that we don’t yet know the full extent or the impact of those claims.
“What we do know is that insurers have made their position clear; wordings reflect the intention that losses associated with COVID-19 are not covered.
“Given there are two very distinct sides to the argument, it is also inevitable that litigation could be the outcome more often than not and the small niche players – the particular subject of our comment on potential business failures – could be hit the hardest.”
Earlier today UAC joined criticism of the initial comments.
“The article does, unfortunately, seem to be rather alarmist in its summation,” it said in a statement.
“There is no doubt that there will be a negative effect on the insurance business in general flowing from such a global pandemic and in Australia especially coming on the heels of the bushfires which affected a huge proportion of our country.
“However the general insurance industry has proven time and again over the years that it is a very resilient industry, capable of coping with disasters both natural and man-made and providing financial support and security to its customers and helping to rebuild communities.”
UAC says that while there will “certainly be an impact to certain sectors within our agency family”, businesses continue to show positive signs of growth.
It also believes customers will increasingly turn to brokers in the current environment, which will in turn generate more enquiries to the agency sector.
“[Agencies] have always shown that they are resilient and can provide fast and favourable solutions to the broker market which has the effect of helping the end customer.
“Overall UAC is confident that underwriting agencies in Australia are here to stay and will continue to provide brokers with a very high level of service.”