Fewer than 1% of businesses that have claimed for business interruption insurance due to Covid-19 have received pay-outs to-date.
A UKHospitality sector survey found that nearly three-quarters (74%) of businesses including pubs and restaurants have claimed, or intend to claim, on policies for business interruption due to enforced closures, however initial figures suggest their chances of success are limited.
Earlier this month the trade body’s chief executive Kate Nicholls told the Commons Treasury Select Committee inquiry that even members with bolt-on cover, both for pandemic or notifiable disease, and for prevention of access to their premises were having claims rejected by insurers.
“We have had lots of feedback from insurance companies to those members saying this is not the way the insurance policy was designed to work,” Nicholls told the committee. “We have had people saying that the government mandating closure of their premises is not a competent authority to close the premises and qualify for restricted access. We have had others saying that you need to have a case of Covid on your premises to qualify, or it needs to be within a mile radius of the premises.”
UKHospitality’s survey also found that 48% of businesses have applied for government-backed loans, but of those 57% have had their bids turned down. Government-imposed state aid rules account for 26% of rejections, with banks telling businesses to exhaust their own capital first accounting for 28%.
Only around a quarter of eligible businesses, meanwhile, have received hospitality grants, which falls significantly short of government estimates.
The government’s furlough scheme has ensured that, at just 2%, redundancies have been kept to a minimum, with 84% of businesses furloughing staff.
Nicholls called on the government to fast-track loans with minimal restrictions, provide grants to all businesses that need them regardless of size, and amend the job retention scheme to reflect actual earnings.
She said: “These findings lay bare the extra work that needs to be done by governments, banks and landlords to make sure as many businesses as possible can survive this crisis. Hospitality was the first hit, the hardest hit and will suffer for the longest, and government support needs to reflect these facts. Hospitality businesses will be key to recovery as prolific employers, major tax contributors, and hubs for social interaction.”