The insurer is paying for the hard line it took against claims arising from the pandemic
It used to be seen as the insurer that was a cut above its peers with an enviable reputation. Hiscox would provide cover where others feared to tread, whether insuring for kidnap risk or for objects in space, as well as more conventional policies for households and firms. The premiums might be a bit higher than those of its rivals but you could be more confident that Hiscox would pay out without a quibble, it was said.
However, that pristine image has been shattered over the past 12 months and the company came to be seen as one of the worst offenders in digging in its heels over paying out to claims from businesses compulsorily shut down by the pandemic and wanting to invoke business interruption clauses.
Last March Matt Davis, joint leaseholder of the Old Courthouse pub, in Royston, Hertfordshire, was relieved when Boris Johnson ordered Britain’s pubs to close as the coronavirus swept the country.
Davis, 42, believed he was covered under a business interruption policy that he had taken out with Hiscox. A few weeks after sending in a claim, he found out he had been denied, as the insurance group said the policy did not cover pandemics, even though its wording did not exclude the event.
Davis came across the Hiscox Action Group, representing Hiscox policyholders that were denied business interruption recompense, which helped him to pursue his claim.
“Their reputation should be in tatters,” Ager, 39, says. “I don’t think you can believe a single thing they claim.” Ager has just received a settlement offer from Hiscox that he describes as “ridiculously low”.
Ager says he had already been inundated with demands for hundreds of documents before Hiscox would even begin to settle his claim. Its slogan, “We never look for loopholes”, is laughable because that is exactly what they do, says Ager, whose business was shut down twice last year by the pandemic and is closed again now.
The stubbornness was mixed with sheer incompetence too, he adds. His offer letter from Hiscox bizarrely refers to Pinnacle as a photographic business, not what it is — a leisure centre with climbing walls 12.5 metres high.
Then there are the ethics of it all. Pinnacle received donations from well-wishers as it battled to survive during the enforced shutdown but Hiscox now wants to use those payments as a reason to reduce its payout to Pinnacle, an approach Ager believes is “morally questionable”.
He argues that Hiscox should have been one of the first insurers to settle because the wording of its policies was comparatively unambiguous. Instead he believes it has been one of the most resistant. “They stuck their head in the sand and got themselves in a position where they couldn’t back down.”
It’s a view completely rejected by Bronek Masojada, chief executive of Hiscox. Revealing a big swing into losses yesterday, he admitted the Hiscox brand has been damaged but argued that the company had no choice but to contest the claims after the legal advice it received.
“Our claims-paying philosophy is deep-rooted: to pay claims quickly, fairly and in line with the intention of the policy. The underwriting intention of these property policies is to respond to local events affecting a firm’s premises and not to nationwide steps taken to manage the pandemic.
“When a claims decision is challenged, it is the wording which determines the coverage in law, and there was room to question whether the Hiscox wording reflected this underwriting intent. We, of course, regret the impact of this disagreement on affected policyholders, and the adverse publicity we received as a result of it has been difficult for all our stakeholders.”
He says he had been ready to settle with claimants after the High Court ruling in September but “once others appealed, we felt we had no option but to appeal and participate in the Supreme Court hearing”. The higher court reached a similar conclusion in January.
How much damage has been done? It is hard to say because we do not know the counter-factual, he says. He points to the 1 per cent growth in UK revenues last year, suggesting that the saga may not have been so damaging. The company’s annual brand review is taking place and may give more evidence into whether customers plan to vote with their feet.
The difficulties plaguing the company go back to the summer of 2019, when its shares peaked at more than £17. It was heavily hit by Hurricane Dorian, which blasted through the Bahamas in September, and typhoons Faxai and Hagibis, which devastated parts of Japan.
Then came a slapped wrist from the Financial Conduct Authority, which in November forced the company to issue a clarification after it appeared to favour a few analysts with price-sensitive information not given to the overall market. The company denied it gave out inside information.
A month later, the falling share price led to Hiscox being ejected from the FTSE 100 after just one year in the stockmarket’s premier league. By March it decided to scrap its dividend to conserve capital as the pandemic hit.
For Masojada, it’s now personal. He says he is determined to restore the good name of the company. “I feel the change,” he says of the company’s poor image. Having spent more than 20 years building the business, he is determined to stay to put things right.
Whether the board, led by Robert Childs, feels the same way is another matter. Even after the share price dive of the past year, Masojada has built huge value for shareholders but, as analysts point out, chief executives don’t normally survive this kind of reputational hit.
“Hiscox continued to fight our claim at every turn, which culminated in an offer on Friday of £972. We were expecting somewhere within the region of £30,000.” Davis said. “They’ve paid us a day’s worth of money for three months worth of trading.”
Among the reasons provided by the insurer was that deferred rent payments saved the pub money, even though Davis would have to pay the rent accrued the following year.
“I will never insure a thing with Hiscox again. When my business partner and I renewed our insurance, we took the minimal amount of insurance to be legal because I now think there is no point to these additional covers because you’re never going to get a payout,” Davis said. “They’re so big, they believe they can force people into submission and, unfortunately, some desperate businesses will accept £972. I am not going to do that.”