The magnitude 8.8 earthquake which struck Chile in February of this year has caused major losses to insurers and certain reinsurers. Insured losses are said to total $8b to $12b with the majority ceded to reinsurers.
So certain claims are getting paid quickly but an article in Business News Americas suggests that some business interruption claims are taking much, much longer to settle.
Business interruption is a vital insurance tool which should enable local businesses to recover quickly from a disaster. It should be desinged for a speedy payout otherwise for many it becomes pointless as their business may well have failed by the time they receive anything.
This is where index-linked insurance (probably of the microinsurance variety) has an opportunity to help. If a similar model to the microinsurance weather linked insurance pilots was used and a business interruption policy was created which could be triggered depending on severity of catastrophe (storm, quake, fire etc) then it would be able to payout quickly, on pre-defined, predictable terms enabling businesses hit by the disaster to recover quickly or at the least give them some financial support to aid their recovery.
The microinsurance model can be adapted to many scenarios in order to help people rebuild their lives and businesses after disaster strikes. Taking the index-linked approach delivers an insurance product that while not perhaps as comprehensive a cover it is far more useful to receive payment speedily and when it is badly needed. It would seem much more efficient to pilot schemes like this rather than subject business owners to a painful year wait before they receive any money (by which time, for many, it is too late).
Full story from Business News Americas here.