This article was first published in Insurance Business UK.

Socially distanced queues, mandatory face coverings and hand sanitiser upon entry are some of the features of the post-lockdown retail experience, as we move into the recovery phase of the COVID-19 pandemic. While some retail operations have stayed open throughout the pandemic as an essential service, many more have only recently been able to reopen their doors under tight rules to keep the potential spread of COVID as limited as possible. As things shift back into gear slowly, many in the insurance industry are wondering about the impact of COVID-19 on claims in the retail space.

Keoghs, the legal solutions arm at Davies Group, handles retail claims for 40% of the top 30 retailers in the UK. It saw retail-related claims plummet early on with a 35% decrease between March and May 2020 compared to that same period last year. That quickly changed through June, with the volume of claims ramping up sooner than expected.

“In the early days, it seemed a surge in claims would be inevitable, and the way things have developed over the past couple months has cemented that forecast,” said Kari Hansen, partner and head of retail at Keoghs. “We’ve been predicting a potential tsunami of coronavirus negligence claims and it seems others are now expecting the same.”

The calm before the storm

History tells us that during times of economic hardship, claims volumes increase. This was proven during the global financial collapse in 2008, and the COVID-19 pandemic is no different. People who are struggling financially will be looking to make claims, particularly in retail, whether they’ve been placed on the frontline during the pandemic or been let go because of it. Add this to the claimant personal injury firms who are seeing the pandemic as an opportunity.

“Law firms and claims management companies have aggressively started advertising for people to submit claims against their employers. Some firms are specifically targeting certain retailers as well,” said Hansen.

Most claims are expected to be relatively low value, but the volume of claims will significantly impact indemnity spend, and therefore insurance premiums. Hansen says it’s important for retailers to be prepared.

The types of claims to arise out of the COVID-19 pandemic will be direct infection claims, which involve, for example, an employee or customer contracting the virus as a result of working/shopping at the retail location, and indirect claims, which arise out of the pandemic generally.

“While we haven’t seen any direct claims yet, we expect that to change. This could include secondary victim claims from family members of people who get sick from going to the stores or working in them,” said Hansen.

From an indirect claims point of view, employers’ liability claims are a big risk and arise out of working conditions. This could stem from a lack of PPE, defective equipment because schedules have fallen by the wayside, or a lack of enforcement around social distancing, especially within distribution centres. There might also be an increase in subjective claims, due to staff feeling overworked because of increased demand, or stress and anxiety claims from workers who feel unsupported at work.

Public liability claims may also occur where visitors feel threatened or vulnerable due to lack of social distancing or other precautionary measures. From a motor claims point of view, while there has been an increase in stationary vehicles on the roads, retailers have had to up the number of home delivery drivers and this combination is likely to result in a higher proportion of fault claims

“There’s a greater risk of more serious and higher value incidents occurring as well because drivers are tired, working longer hours, and may be driving faster because of less traffic on the road. There are also more cyclists on the roads as well since the pandemic started, introducing added risk,” said Hansen.

Claims behaviours

Retail clients are feeling particularly challenged by the increase of complaints attributed to COVID-19-related issues, especially when it comes to protecting their brand and reputation.

In Keoghs’ experience, almost half of indirect COVID-19 related retail claims received to date are being pursued by unrepresented claimants. Often brought within a week or so of the incident occurring, Hansen says these complaints are landing on CEOs’ desks.

“There is serious board-level interest in these complaints, with brand protection on the forefront of their minds,” said Hansen. “We’ve seen threats to go to the Press by unrepresented claimants, and the board might be more inclined to take a more lenient view because they don’t want to risk that press potential and that social media interest.”

Monitoring claims behaviours generally will be extremely important, including with claimant solicitors. Leniency may open the floodgates for claimant solicitors to maximize their returns against retailers who take a less robust stance.

“Faced with financial difficulties, claimant solicitors might troll through old claims and we also think they will look to maximize subjective injury types, for example, psychological claims, thereby increasing the cost of claims,” Hansen explained.

There’s also a great propensity for fraud, with an increase in exaggerated and false claims expected. Hansen says these need to be nipped in the bud early by monitoring the behaviours of claimants and claimant solicitors, as well as keeping an eye on any court decisions surrounding COVID-19 issues.

Be proactive – Retailers need to have a clear, proactive and strategic approach to COVID-19, rather than just waiting for claims to start coming in. Hansen shared a few simple strategies retailers can adopt to counterbalance the risk and help minimise the impact:

Create a timeline – Record all the measures put in place, including staff training and equipment provided, especially relevant to changes in government guidance.

Turn to advisors – Retail clients should share all coronavirus material and documentation, including all versions of risk assessments to legal advisors right away.

Keep up with regular accident reporting – While focus will naturally fall on COVID-19 compliance and guidelines, retailers need to keep up momentum on all incident reporting and investigations.

For retailers, brand protection is key, but this has to be balanced with not being seen as a soft touch which could lead to increased issues. There is no escaping that COVID-19 is going to have a long-lasting impact for retailers who need a clear line of sight as to how the claims dynamic is changing. Retailers will also need to devise and flex strategies specifically targeted at controlling claims in this new claims era, and be ready to navigate through the reputational challenges that COVID-19 brings.