How insurtech can help SMBs dealing with Business Interruption insurance programs?
OTONOMI is a B2B SaaS for insurance carriers. Our platform drives efficiencies in operations by automating claims, saving insurance over 50% in administrative costs. As a result, we eliminate the claim process for a better experience for the policyholders and outperforming combined loss ratios for insurance partners. We are working in the transportation, logistics, and mobility industries.
Business interruption insurance is a coverage that replaces business income lost in a disaster. The event could be, for example, a fire or a natural disaster. Business interruption insurance is not sold as a separate policy but is either added to a property/casualty policy or included in a comprehensive package policy as an add-on or rider.
For example, if a tree falls on your building or your office and you cannot work as you need to shut down the location for repairs, this policy can help cover the costs of your lost income. If you own a store, and a government-mandated road closure temporarily shuts down your company, your business income insurance may also cover the lost income provoked by this closure and the difficulty for the clients to come to your store.
What is covered by Business Interruption Insurance?
If your business has to shut down for an external cause, your interruption insurance can help cover your operating expenses, like:
● Revenue you would normally make if the business was open.
● Mortgage, rent, and lease payments for the business building.
● Loan payments that you need to make during that time for your business.
● Payroll for your employees.
● Extra expenses, like relocation costs or renting another space to run your business
How about the Covid Pandemic?
A business that has interruption insurance needs a series of factors to be covered:
- The property has to sustain damage (e.g., a tree falling on the building)
- The property must be insured (if you rent, you might not be covered)
- The peril itself must be insured (and not clearly excluded)
- The final point, but the most important: the loss must be quantifiable
If all these conditions exist, coverage could payout until the restoration of the damaged property and until the company is back in business.
It’s easy to quantify a loss attached to a damaged building, but what about Covid? The coronavirus disrupts many businesses without any physical damage to the organization.
A business slowdown will have an effect on a loss of revenue, some disruptions in the supply chain, and the business might have to shut down due to the need to disinfect, but none of these consequences would be the result of physical damage, and none would trigger a payout from a typical business disruption policy.
A virus leaves no visible imprint!
SMBs need insurtech solutions
Another problem for SMB is that courts across the United States have not agreed on a single rule as to when an insured property has suffered damage or a physical loss from Covid. Some judges have determined that contamination and other similar incidents that make it impossible to use a business property can be interpreted as a physical loss that’s sufficient to trigger business interruption coverage.
So insurers had to review every business interruption claim on a case-by-case basis and not dismiss them outright. That means more time before expecting a payment from the insurance company.
Small businesses have been among the worst hit by the coronavirus crisis. Even if it’s still too early to tell exactly how the current crisis will affect the SMB insurance sector, we can definitely think that SMB will have different demands on how they want to buy products and receive claims payouts.
Historically, the demand for faster access to payouts has always been important among SMBs and the pandemic has also created a demand to receive funds via direct deposit rather than check, as business owners look to avoid a visit to a physical bank branch.
Business owners still need an accelerated payouts process now more than ever.
Digital payments, automating the adjudication process, and providing an overall more seamless experience for small businesses is particularly vital today to ensure business owners have the funds they need to survive and the InsurTech might be the answer.
Insurtechs can provide transparency and a faster digital payment process to the SMBs affected by Covid.
As usual, stay healthy.