Commercial brokers remind industry about emergency ‘hold covered’ protocols

As Canadian businesses and individual policyholders adjust to a new era of social distancing and service restrictions or shutdowns, brokers and insurance companies have turned their minds towards extending policy renewal deadline dates in the event of a declared emergency.

“Everyone agrees, this pandemic is presenting both a health crisis as well as an impending financial crisis,” the Toronto Insurance Council (TIC) stated in a message to its membership Thursday morning.

In the case of the current COVID-19 pandemic, brokers are preparing for a hypothetical situation in which care for a family member may prevent a policyholder from renewing on time. Or more likely, in light of potentially significant economic disruption, a person may experience cash-flow issues during the state of emergency.

“The Insurance Brokers Association of Canada (IBAC) is preparing an urgent national communication to all insurer partners with messaging about the importance of ‘hold covered’ protocols, and exercising flexibility with premium payments and accounts receivable for customers who may encounter challenges in this regard,” TIC said in its message.

Later on Thursday, Insurance Bureau of Canada (IBC) issued a press release recommending that “consumers who have questions about their current insurance coverage, or are concerned about their ability to continue to pay their premiums due to the impact of COVID-19, should contact their insurance representative to discuss a potential solution.”

IBC’s statement added that “business insurance products, in particular, are often highly specialized and tailored to a client’s unique needs, so it’s important for business insurance customers to engage their insurance representatives in any discussion about their policy.”

TIC points out that there is ‘Declaration of Emergency Endorsement,’ which is endorsed by IBC.

The emergency endorsement extends an insurance policy’s termination date at any time “when an ‘emergency’ is declared by a Canadian public authority designated by statute for the purpose of issuing such an order.”

The endorsement says the emergency must have a direct effect or impact on either:

• the policyholder, the policyholder’s site, or the policyholder’s property located within the emergency area; or
• the operations of the insurer or its agent/broker located in the declared emergency area.

Under the endorsement, the insurance company essentially agrees to hold their clients’ existing policy coverage for up to 120 days beyond the end of the emergency.

IBC member insurers are not required to attach this endorsement to every policy.

Negotiations between brokers and insurers on this issue is ongoing.