What the UK riots mean for insurers

Many UK businesses suffered substantial damage during the riots that swept the country over the past two weeks, and insurers are likely to be processing a high volume of inquiries and claims across the country.

However, many business owners are unaware of whether they are covered, or their right to claim under the RCA 2016 and, with the potential for further rioting, protests and unrest, the situation and risk environment is fluid and precarious. Below are some key things for insurers to consider in the wake of the riots and during communications with business owners.

Who and what is covered?

Most commercial property policies will cover companies for damage to the premises caused by civil unrest.

Often, this will include “interruption to business operations” cover; this covers a loss of income for a given period if property damage prevents business continuing as usual. Some policies may also include denial of access cover if a business owner is unable to operate due to restricted access to the property, for instance, if a police cordon was to prevent consumers from entering a business.

Damage to a vehicle during a riot will often be covered by comprehensive motor insurance policies.

Some covers are optional, so policies must be examined individually.

Another route to claim: Riot Compensation Act

For those who are uninsured, underinsured, or have had claims rejected, the Riot Compensation Act 2016 gives eligible victims of criminal damage or loss during a riot the right to claim compensation despite their coverage status. Compensation may take the form of money or repairs undertaken at the claim authority’s expense.

Those who have insurance must claim via their insurer first. Businesses have 42 days to claim through the RCA from the date the riot ends, and businesses owners who are covered have 42 days to make a claim from the date that their insurer rejects a claim or informs them they are not covered.

RCA will cover, noting that:

• Owners of a building may claim for damage to the buildings structure;
• Tenants/occupiers may claim for damaged/stolen contents;
• Damaged or stolen business items stored in a vehicle;
• Damaged or stolen stock-in-trade vehicles; and
• Damaged or stolen underinsured vehicles.

However, the RCA will not cover:

• Personal items held outside of a building;
• Consequential loss e.g. loss of trade or rent; and
• Personal injury – this is dealt with by the Criminal Injuries Compensation Authority (CICA)

However, to recover money from the government, insurers, and loss adjusters acting on their behalf, need to demonstrate, and gather evidence to prove, that a riot has occurred. Riot is a peril which is specifically defined by legislation as 12 or more people acting with common purpose.

Insurers should look to advise claimants on gathering evidence through CCTV and media coverage (both social media and mainstream), to demonstrate that any damage or loss was caused by a riot that falls within the criteria defined by legislation.

Next steps & key considerations for Brokers

Collecting evidence

Riot is one of the few perils defined by legislation; the criterion for riot is that it must involve 12 or more people acting with common purpose. As mentioned above, collecting evidence, such as CCTV or media footage, to demonstrate that a riot, as defined under legislation, caused damage or loss will aid the processing and settlement of claims and claims through the RCA 2016. It will also aid insurers claiming back compensation paid out to individuals through relevant policy authorities.

House keeping & risk mitigation advice

Given the febrile sociopolitical climate and potential for further civil unrest, insurers should advise clients to ensure normal housekeeping and risk mitigation is in order. For instance, an insured’s security system, shutters, security doors, sprinklers and fire alarms should be in place and checked to ensure that they are working to the premises. CCTV functionality should also be checked as this could provide key evidence for future claims or criminal prosecutions.

Vulnerable customers

There is likely to be an increase in vulnerable customers following the riots. Given the physical and psychological damage left by the riots, business owners are likely to be worried about future incidents, concerned about their finances and the impact on their operations and emotionally distressed given the violence and destruction during the unrest.

Due to the prevalence of anti-immigration and racist rhetoric, combined with the rise in racially motivated attacks accompanying the unrest, many may also be fearful that they or their business will be targeted according to their ethnicity or religion.

Brokers must be sensitive to the needs of vulnerable customers, ensure they are treated fairly, and  deliver good outcomes. Claims should be settled and paid out as quickly as reasonably possible to help victims of the riots and their businesses to recover swiftly.

Riot Compensation Act 2016

Claimants who have their claims rejected in full or in part, or who are not covered for damage or loss arising due to riot, should be made aware of their right to claim compensation under the RCA 2016 to ensure they can access the help available to them. Appropriate signposting can ensure that businesses are able to receive the support they need to recover.

Answering difficult questions

A common question among business owners is, ‘if we close voluntarily, will we still be covered by the insurance policy?’. This is a difficult question to answer, especially as business owners may be forced to close if they feel threatened or in danger.

Usually, however, the loss of sales is only recoverable if closure of business is forced by a police authority (or other competent authority).

If policyholders close, or need to close, due to riot, it is important to record the decision to close and reasoning behind it. For instance, if the police were to visit a business and advise them to close as riots were expected, the businessowner should note the time they were told and the officer who told them, ensuring that the policyholder has all the relevant facts when approaching their insurer.

Learn more

Our e-learning platform, the Development Zone, contains courses to help teams to assess and build knowledge on key areas following the riots- all whilst fulfilling CPD requirements. Useful courses include:

• Riot compensation
• Commercial Property Insurance- Intermediate (Multi module course)
• Commercial Property Insurance- - Claims handling
• Vulnerability: Identifying, Understanding and Supporting Vulnerable Customers in Financial Services (Multi module course)

If you are not a Development Zone user, get in touch with the team at devzone@ukgigroup.com to discuss our services and access a 14-day free trial to view the system and it's features for yourself- no commitment, no cost!