While UK insurance companies in general favor blanket exclusion of the Year 2000 question from the areas they cover with their products (CI No 3,435) they are being urged by brokers to enable customers to pay an extra premium for Y2K coverage on their standard professional indemnity (PI) policies, subject to proof they have taken adequate precautions against the untoward, according to Peter Staddon, technical services manager for the British Insurance and Investment Brokers Association (BIIBA). This facility is variously known as ‘buy-back’ or ‘write-back’ in the industry, though it is currently enjoyed by only a small minority of clients. BIIBA has already gained important concessions from the insurers. Staddon revealed that the Association of British Insurers (ABI) came to a recent meeting prepared to exclude Y2K issues altogether from product liability policies, arguing that the event is a foreseeable one and thus outside the scope of insurance coverage. Thanks to the brokers’ arguments, however, they have now agreed to cover material damage and business interruption. ‘In other words, if a boiler fails because of an embedded chip and causes a fire, the fire damage and resulting loss of business will be covered, but not the boiler itself,’ he explained. Staddon said the brokers are the interface between the industry and the clients, and must thus convince them, while protecting themselves against wholesale meltdown over Y2K claims, to nonetheless offer the kind of limited coverage the buy-back would represent. He foresaw capacity problems for the industry, however, if the system becomes more widespread, as there probably won’t be enough of a reinsurance market for the sector to cover itself. A second problem also mentioned by Staddon was continental Europe, where insurance industry attitudes to the Y2K problem are very different to those in the UK. ‘They’re more involved in monetary union, so Y2K won’t be handled in the same way’ he argued. His concern is that coverage of Y2K will be readily available in the rest of Europe, leaving UK brokers in the position of having to advise their customers to buy insurance abroad for the Millennium question. Of course, UK insurers, who are clearly of the opinion that the problem is potentially more serious than their colleagues on the mainland believe, may regard the loss of such business as not altogether a bad thing.
