We’ve just passed the one-year anniversary of the UK riots, when a shooting in London sparked five days of arson, theft, property damage and violence across England. It ended with 30,000 people arrested and thousands of small and large retailers picking up the pieces of their boarded up and burnt out businesses.
The Association of British Insurers (ABI) this week reported there were 3,000 insurance claims following the riots, 95% of which have now been settled or interim payments made.
After a year, you might expect all claims to be settled, but the situation is complicated by the Riot Damages Act of 1886 which allows victims of rioting to recoup their losses from the police. As a result, both insurers and businesses are using the Victorian law to recover their losses from the government.
I spoke to the Willis UK Retail team about the work they’ve been doing over the past year to help our clients get back on their feet.
There were typically two types of claims from the riots according to Kelvyn Sampson, Willis UK National Retail Practice Leader:
- Those for direct physical loss and subsequent loss of gross profit
- Those for loss of gross profit where no physical damage occurred.
“The direct physical loss claims have been relatively straightforward,” said Kelvyn. “The business interruption losses have been far more complicated, as even the widest form of Prevention of Access cover on retailers’ business interruption policies usually has a radius where the damage had to have occurred. Yet some retailers who closed early due to the riots, or saw less footfall in the days following the troubles, were unable to claim as the riots were not in the policy radius.”
The riots have tested every insurance policy to its limits, said Judy Polak, Claims Consultancy Director at Willis UK Retail.
“One of our clients had over 100 stores damaged throughout the country. Another client had a major distribution warehouse destroyed, containing goods belonging to over 500 different customers—that’s equivalent to 501 claims!”
“No one expected what happened. Businesses had losses at numerous sites, which insurers interpret as more than one incident even though it stemmed from the same cause,” said Judy.
Impact of the Riot Damages Act
The Riot Damages Act has created a logistical nightmare for those businesses with losses at numerous sites as recoveries have to be made from the police authority where each individual loss occurred. There is also a mismatch between insurer and police authority definitions of business interruption and different interpretations of the 72 hour clause by insurers, further complicating the number of incidents and the policy excess to be paid.
“As brokers we’ve been working hard to provide insurers and police authorities with all the information they need to make sure our clients’ insurance claims are paid quickly and all uninsured losses identified and included in the recovery from the police,” Judy told me.
Unsurprisingly, this week the ABI called for changes to the Act, including a clearer definition of a riot and streamlining of claims processes with local authorities.
Are Some Suburbs Now Considered Riskier?
As to whether businesses in the suburbs that experienced rioting will now face higher insurance premiums in future, Kelvyn says the picture is mixed. “For theft and arson some postcodes in major urban centres have always been considered riskier and carry higher premiums. But major retailers usually have large property portfolios with a spread of risk, so there isn’t a significant impact for them.”