While corporates had shut their factories due to the lockdown, there’s no provision to cover such losses in the policy. The net result is that they may not get any insurance claim from the insurance companies under the Standard Fire and Special Perils Policy, commonly known as property policy. “If the insured plant or office is shut down due to any damage or fire, the company is eligible for claims. But now, factories are shut due to lockdown. Any business interruption loss out of lockdown is not covered under the policy terms,” said an official.
However, insurers have given relief to corporates, which shut their units for more than a month. Their policies will be allowed to be operational despite the clause that if a unit is shut for 30 days continuously, the policy cover will lapse. The General Insurance Council (GI Council), the official representative body of general insurers, has managed to get this relief for India Inc from the general insurers for the “unoccupied properties” for more than one month till May 3 under the property policy. This means companies can claim insurance if the property is damaged due to fire or any other loss even if the factory or unit is not operational during the period till May 3.
As per the GI Council, a Property Policy specifies if the building insured or containing the insured property becomes unoccupied and so remains for a period of more than 30 days (not applicable for dwellings), the insurance claims may not be applicable if the property affected — before the occurrence of any loss or damage — obtains the endorsement and continuation of coverage.
“However, we are all going through an unprecedented situation of lockdown. We understand that in the current crisis it may not have been possible for some policyholders to send communication to insurance companies for continuation of coverage and obtain endorsements. Therefore it has been decided that a one-time relaxation is given to all policyholders whose property is unoccupied on or after March 25, 2020 till May 3, 2020. Properties of such policyholders will be deemed to be covered subject to the policy being in force. All other terms and conditions of the policy remain unaltered,” GI Council said.
“The general insurers have been advised by IRDAI to inform the policyholders of how the relevant clause (s) would apply beyond May 3, 2020 in all policies and what action is needed by the policyholders to avail of uninterrupted coverage,” IRDAI said, adding the insurers need to take a reasonable and suitable approach depending on the local situation in different geographies.
The Insurance Brokers Association of India had written to IRDAI, pointing out as the current lockdown period cumulatively has been extended beyond 30 days, insurers should take cognizance of the current state of affairs and treat it as an ‘extraordinary and one off situation’.
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