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Businesses Thought They Were Covered for the Pandemic. Insurers Say No.

When the Great Lockdown started in Michigan, Nick Gavrilides closed the dining room of his Soup Spoon Cafe in Lansing, had some farewell beers with his workers and set to work on an insurance claim.

He had paid for business interruption insurance, a type of coverage that replaces a portion of a firm’s lost revenue when a disaster forces it to suspend operations, and was expecting his carrier, Michigan Insurance Company, to cover at least some of his losses. He didn’t get a cent.

“At first I thought, OK, we’re toast, this is it,” Mr. Gavrilides said. Then he sued.

Since the pandemic hit the United States this year, thousands of business owners like Mr. Gavrilides have discovered that the business interruption policies they bought, and have been paying thousands of dollars in annual premiums to sustain, won’t pay them a thing — just as they are struggling through the biggest business interruption in modern memory.

Now, many of them — from proprietors of gyms and dental practices to high-profile restaurateurs including the Chez Panisse owner Alice Waters, the owner of Cheers in Boston and even a National Basketball Association team — are taking their insurers to court, hoping to force them to cover some of the financial carnage. So far, more than 400 business interruption lawsuits have been filed, according to insurance lawyers.

“I think business interruption claims should be paid when business is interrupted,” Mr. Gavrilides said.

Insurance companies don’t see it that way. Most business interruption policies include highly specific language stating that for a claim to be paid out, there has to be “direct physical damage” — say, a flood that washes away a building or a fire that burns down inventory, forcing a business closure.

On top of that, after SARS swept through Asia nearly two decades ago and caused widespread economic damage, many insurers began to write in language that excluded business interruption caused by viral epidemics. For instance, Mr. Gavrilides’s policy states that the insurer “will not pay for loss or damage caused by or resulting from any virus, bacterium, illness or disease.”

Insurers say they aren’t being stingy; they simply don’t have enough capital to cover all coronavirus-related claims and would suffer enormous losses if they had to pay out.

The industry’s position hasn’t deterred business owners. Some plaintiffs are arguing that the pandemic calls for new interpretations of what “direct physical damage” means for their business. Others are highlighting the spillover effects of closures on local economies.

Image
Credit…Matt Stone/MediaNews Group, via Boston Herald

When the governor of Louisiana banned gatherings of more than 250 people in March, John W. Houghtaling II, a New Orleans lawyer and veteran of the insurance wars that followed Hurricane Katrina in 2005, didn’t wait for his client’s insurance claim to be denied before suing. Mr. Houghtaling represents Oceana Grill, a 500-seat restaurant that is insured by an underwriting group with Lloyd’s of London, the insurance marketplace.

“We have reason to believe that Lloyd’s took premiums without the intention of providing the indemnity paid for,” he said.

The lawsuit seeks court affirmation that the insurer must cover Oceana Grill’s lost revenue because the restaurant paid for a policy that covers risks from all pathogens except those introduced through “terrorism or malicious use.” It also argues that the coronavirus contaminates surfaces that can be difficult to clean in New Orleans’s hot, muggy climate, causing “real physical loss and damage.” The city’s mayor, LaToya Cantrell, cited the virus’s propensity to cause such property damage in an emergency proclamation the day the lawsuit was filed.

Lloyd’s has argued that Oceana Grill’s claims are premature and hypothetical. A spokesman declined to comment beyond the court filings. A hearing on whether to dismiss the lawsuit is scheduled for Aug. 20.

Mr. Houghtaling, along with big-name restaurateurs such as Daniel Boulud, Thomas Keller, Wolfgang Puck and Jean-Georges Vongerichten, formed the Business Interruption Group in April to push the insurance industry to pay claims. To draw attention to the matter, the group has advertised on billboards in Times Square and is supporting legislation that would allow insurers that paid business-interruption claims, regardless of policy language to the contrary, to receive reimbursements from the federal government.

But so far, it’s not looking good for the plaintiffs.

On July 1, a county circuit judge threw out Mr. Gavrilides’s case, one of the first to be decided anywhere. Judge Joyce Draganchuk, ruling from the bench in a Zoom hearing, said that for coverage, there had to be tangible damage, something “that alters the physical integrity of the property.”

Both the Soup Spoon Cafe and the Bistro, another restaurant Mr. Gavrilides owns in Ingham County, Mich., were in mint condition, so they didn’t qualify. The judge left little ambiguity, repeating the basis of her decision several times, and said there was no point in filing an amended complaint.

Mr. Gavrilides’s lawyer, Matthew J. Heos, said he has filed an appeal. In the meantime, Mr. Gavrilides, who pays an annual premium of $12,002 for his policy, is staying afloat with a loan from the federal government’s Paycheck Protection Program.

Dozens of minor-league baseball teams have sued Philadelphia Indemnity Insurance Company and others, saying the cancellation of their season qualifies them for business-interruption payments. Minor-league teams normally get their players from Major League Baseball, but none materialized this year. Some lease their stadiums from the cities they play in, and, with no revenue, they can’t make their lease payments. That, in turn, could threaten municipal bond payments and even the urban renewal plans that rely on minor-league baseball in some places.

A spokesman for Philadelphia Indemnity, Bill Procopio, said the company could not comment on pending litigation. The lawsuits are now pending in three federal courts.

The N.B.A.’s Houston Rockets have sued Affiliated FM Insurance Company in a state court in Rhode Island, where the insurer’s parent, FM Global Group, is based. The N.B.A. cut short its season this year, but the Rockets were hit especially hard when Houston emerged as a Covid-19 hot spot. The Toyota Center, where the Rockets play, is a co-plaintiff, having had to cancel rodeos, concerts, a barbecue cook-off and other events as well as basketball. The lawsuit said the loss of the arena was itself a form of “physical damage.”

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Credit…Thomas Shea/USA Today Sports, via Reuters

“The property has been impaired,” it said. “The loss of functionality is no less physical than the impact of a property having lost its roof to a tornado or hurricane.” A spokesman for FM Global, Steven Zenofsky, said the company could not comment on the legal dispute, which remains pending.

Many insurance executives argue that pandemics are uninsurable. At its most basic, insurance involves the efficient pooling of risks, so that everybody in a pool pays premiums but only a few have claims. That way, the many who have no losses can subsidize the few who do. That principle can’t work in a sweeping pandemic shutdown, where virtually everybody has a loss.

The American Property Casualty Insurance Association has estimated that if insurers were required to cover all U.S. business interruption losses tied to the shutdowns, regardless of policy exclusions — something proposed by lawmakers in some states — it would cost $1 trillion a month.

The insurance industry could buckle under the strain of having to pay for even a portion of that amount, said Sean Kevelighan of the Insurance Information Institute, a nonprofit industry group. “Only the government has the capacity to provide relief to businesses” in a pandemic, Mr. Kevelighan added.

There are already proposals for federal involvement in future pandemics. Representative Carolyn B. Maloney, a Democrat of New York, has introduced legislation that would create a federal pandemic reinsurance program, modeled after the Terrorism Risk Insurance Act, which she sponsored after the terrorist attacks of 2001.

Reinsurance is widely used by insurers to keep their exposure to risks from growing too large or concentrated; the insurers pay reinsurers to take over the payment of some of their expected claims. But losses from terrorism or pandemics are too big for existing reinsurance companies to take on, which is why Congress is considering a federal version.

Ms. Maloney’s bill would bar insurers from excluding viral epidemics from coverage. In future epidemics, they and the government would each pay a portion of the claims upfront. After that, the insurers would reimburse the government for its outlays over many years.

Evan G. Greenberg, the chief executive of the insurance giant Chubb Limited, has put forward another proposal. His plan would divide the market into two segments, one for small businesses and the other for medium-to-large businesses.

Small businesses would get a simple program that would replace a portion of each company’s payroll quickly. Buying coverage would be mandatory, unless a company opted out in writing. For larger companies the government would create a reinsurer, Pandemic Re. Insurance companies would write pandemic insurance, charging market-based premiums, then transferring most of the risk and the premiums to Pandemic Re.

“It’s a total free-market program,” Mr. Greenberg said. Companies could decide whether or not to participate. “But if you don’t,” he said, “don’t come to the government asking for a handout.”

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Internet of Everything vs Internet of Things: What’s the Difference?

Illustration: © IoT For All

Unless you’re an expert, there’s little difference between the Internet of Things (IoT) and the Internet of Everything (IoE). However, the latter term is broader, semantically. In this post, we’ll go into the details to explain why IoT software development companies use the term IoE comparatively rarely.

The Difference

The term IoT was coined in 1999 to refer to machine-to-machine, or M2M, communication. IoE appeared a few years later, to describe interrelated elements of a whole system, including people. IoE entails not only M2M communication but also P2M (people-to-machine) and even P2P (people-to-people) communication.

To understand the differences between the three types of communication, let’s consider several examples. Say it got dark outside and you turned on a light in the office, then you sat and typed on a keyboard. This scenario provides P2M examples of IoE.

We are so used to these things that we don’t even realize they are part of a system. Another example: You make a Skype call to your colleague. That’s a simple human-to-human, or P2P, communication. An example of M2M communication, on the other hand, is the process of data exchange between your office temperature sensing devices and the HVAC mainframe.

You might think M2M communication, being technological, is the most progressive means of interaction. but IoE focuses on P2M and P2P interactions as the most valuable. According to a Cisco analysis, as of 2022, 55% of connections will be of these two types. 

IoE is now considered the next stage of IoT development. Maybe this is why there are so few IoT development companies offering IoE development services at the moment. Internet of Things solutions are now more common and widespread.

4 Main Elements of the IoE Concept

 Thing

By thing, we mean an element of the system that participates in communication. A thing is an object capable of gathering information and sharing it with other elements of the system. The number of such connected devices, according to Cisco, will exceed 50 billion by 2020. 

What are things? In the IoT, a thing could be any object, from a smart gadget to a building rig. In the IoE, that expands to include, say, a nurse, as well as an MRI machine and a “smart” eyedropper. Any element that has a built-in sensing system and is connected on a network can be a part of the IoE.

People

People play a central role in the IoE concept, as without them there would be no linking bridge, no intelligent connection. It is people who connect the Internet of Things, analyze the received data and make data-driven decisions based on the statistics. People are at the center of M2M, P2M, P2P communications. People can also become connected themselves, for example, nurses working together in a healthcare center.

Data

In 2020, it’s projected that everyone using the internet will be receiving up to 1.7 MB of data per second.

As the amount of data available to us grows, management of all that information becomes more complicated. But it’s a crucial task because, without proper analysis, data is useless. Data is a constituent of both IoT and IoE. But it turns into beneficial insights only in the Internet of Everything. Otherwise, it’s just filling up memory storage.

Process

Process is the component innate to IoE. This is how all the other elements — people, things, data — work together to provide a smart, viable system. When all the elements are properly interconnected, each element receives the needed data and transfers it on to the next receiver. The magic takes place through wired or wireless connections.

Another way to explain this is that IoT describes a network and things, while IoE describes a network, things, and also people, data, and process.

Where Is IoE Applied?

As to the market, we can say confidently that IoT is a technology of any industry. IoE technology is especially relevant to some of the most important fields, including (1) manufacturing, (2) retail, (3) information, (4) finance & insurance, (5) healthcare. 

IoE technology has virtually unlimited possibilities. Here’s one example: More than 800 bicyclists die in traffic crashes around the world annually. What if there was a way to connect bike helmets with traffic lights, ambulances, and the hospital ecosystem in a single IoE. Would that increase the chances of survival for at least some of those cyclists? 

Another example: Do you realize how much food goes to waste, say at large supermarkets, because food isn’t purchased by its best-before date? Some perishable products like fruit and vegetables are thrown away due to overstocks even before they get to the market. What happens if you find a way to connect your food stocks with the racks and forklifts of the supermarket in-stock control system using IoE?

There are endless variations on uses of IoE right now, and many of them are already becoming familiar in our “smart” homes.

Summing up

In our industry, few would deny the value of IoE in improving our standard of living. Luckily, there’s a flourishing market of IoT development services. Who knows, maybe one day soon, you’ll be a “thing” in the IoE environment.

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Igloo raises $8.2M to bring insurance to more people in Southeast Asia

Singapore-based Igloo, formerly known as Axinan, has raised $8.2 million as the insurance-tech startup looks to broaden its foothold in half a dozen Southeast Asian markets and Australia.

InVent, a corporate venture capital arm of telecommunications firm Intouch Holdings, led Igloo’s extended Series A round, the startup told TechCrunch. Existing investors Openspace Ventures, a venture capital fund that invests in Southeast Asia, and Linear Capital, a Shanghai-based early-stage venture capital firm focusing on tech-driven startups, participated in this round, which makes four-year-old Igloo’s to-date raise to $16 million. It raised about $1 million in its Seed financing round.

Igloo — founded by Wei Zhu, who previously served as Chief Technology Officer at Grab — works with e-commerce and travel firms such as Lazada, RedDoorz, and Shopee in Southeast Asia to offer their customers insurance products that provide protection on electronics, and coverage on accidents and travel.

The startup, which also operates in Vietnam, Philippines, Thailand, Singapore, Indonesia, and Malaysia, said more than 15 million users have benefitted from its insurance products to date, and in the last one year it has processed more than 50 million transactions.

Igloo, which rebranded from Axinan this month, said insurance products are proving especially useful to — and popular among — people during the coronavirus outbreak.

Raunak Mehta, Chief Commercial Officer at Igloo, told TechCrunch that the startup has seen a surge in transactions and customer acquisitions in the last 45 days. “While some travel related business have seen a dip, the larger e-commerce business continues to see a surge,” he added.

“With COVID-19 impacting every facet of personal life and business, digitisation can help the world adjust to the new normal. This is especially apparent in insurance, where we can tap on digital channels for distribution and also for creating awareness,” said Zhu.

“We see that digital insurance is on the rise in Southeast Asia, and we believe that Igloo, with our digital-first approach and expansion of our product portfolio into personal health, accident and other related products can help fill those gaps and address consumers’ needs for personal well-being,” he added.

He said the digital insurance penetration remains low in Southeast Asia, and Igloo sees massive opportunity in the space. According to one estimate (PDF), Southeast Asia’s digital insurance market is currently valued at $2 billion and is expected to grow to $8 billion by 2025.

The startup, which competes with a handful of startups including Singapore Life and Saphron, will use the fresh capital to expand its business development and engineering teams and broaden its presence in the half-dozen markets. It is already engaging with telecom operators, banks, non-banking financial firms, and travel agencies, it said.

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Driven by offshore investments, India’s reinsurance market to reach US$7.8bn by 2024, says GlobalData

India’s
pure reinsurance business is among the fastest-growing markets globally. The
recent regulatory changes by the Insurance Regulatory and Development Authority
of India (IRDAI) are set to encourage the offshore companies to set up reinsurance
operations in India. These amendments will not only bring a level playing field
for …

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Once Scrutinized, an Insurance Product Becomes a Crisis Lifeline

A type of private insurance that is used by wealthy business owners to cover unlikely risks and that has been challenged by the Internal Revenue Service is proving to be beneficial as the coronavirus pandemic shuts down local economies.The structure, known as a small captive insurance, allows business owners …

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How is IoT Reshaping the Insurance Industry? | Dan Davis, Director of IoT and Emerging Markets at LexisNexis Risk Solutions

#IoTMakers E057Listen on Apple Podcast  |  Listen on Spotify  |  Listen on Google PodcastsIn this week’s IoT For All Podcast, Dan Davis, Director of IoT and Emerging Markets at LexisNexis Risk Solutions, joins us to talk about the intersection of IoT and the insurance industry. We discuss how IoT and …

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Travel insurance changes could impact the insurance industry, says GlobalData

Following the news that LV= has stopped offering travel insurance and Aviva has altered its travel offering to exclude travel disruption following the spread of coronavirus across the globe;

Daniel Pearce, Senior Insurance Analyst at GlobalData, a leading data and analytics company, offers his view:

“According to GlobalData research, trip …

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Aon purchases Willis Towers for $30 billion

Aon Plc agreed to buy Willis Towers Watson Plc in an almost $30 billion transaction that combines the world’s second- and third-biggest insurance brokerages.The all-stock deal, the largest ever for the industry, comes almost exactly a year after previous talks between the two companies broke down. Aon Chief Executive …

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Regulatory initiatives to help Malaysian life insurance business surpass US$13bn in 2023, says GlobalData

The Malaysian
life insurance market, in terms of gross written premiums, is projected to grow
at a compound annual growth rate (CAGR) of 4.4% from MYR46.7bn (US$11.6bn) in 2019
to MYR55.4bn (US$13.7bn) in 2023, says GlobalData, a leading data and analytics
company.

GlobalData’s report, ‘Malaysia Life Insurance: Key Trends and Opportunities to 2023’, reveals that term insurance, endowment and whole life products account for almost 90% of Malaysia’s life insurance business. Rising working-age population and government and regulatory initiatives towards affordable insurance products are the key factors driving the growth.

Sangharsan Biswas, Insurance
Analyst at GlobalData, comments: “As of end-2018, the share of working-age
population stood at 66.2%. This offers huge growth potential as 46% of the
population still does not own life insurance product.”

IMAGE FOR PUBLICATION: Please click here
for enlarged chart

In 2017, the Malaysian government
launched affordable insurance scheme, Perlindungan
Tenang
, aimed at enabling accessibility of life insurance for economically
weaker section of the population. Since then, leading insurers such as Allianz
introduced micro-insurance products to tap into this segment. Sun Life Malaysia
partnered with U Mobile to offer affordable mobile-based life micro-insurance, to
cater to U Mobile’s customer base. Similarly, Gibraltar BSN partnered with
mobile wallet provider Boost Malaysia to promote mobile-based insurance premium
payments. These steps are expected to expand life insurance penetration in the
country.

Efforts are also being made
by the regulatory authority and industry association to promote insurance
awareness. In 2019, a national strategy plan for financial literacy was
launched to implement large-scale awareness campaign.

The regulatory authority has
also been taking steps towards improving product accessibility. It is now mandatory
for life insurers in Malaysia to offer standalone term insurance through their direct
distribution channel – either own office or online platform. Due to their more
affordable pricing, it is expected to help insurance adoption.

Biswas concludes: “With
focus on improving accessibility of insurance in the country, insurers will use
technology to expand their reach and also offer affordable products.”

Source: GlobalData