UK Insurance Assoc Issues Year 2000 Insurance Warning

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August 11, 1998: 4:02 p.m. ET

LONDON, ENGLAND (NB) -- By Sylvia Dennis, Newsbytes. The Association of British Insurers (ABI) has issued an information sheet, advising consumers on how their insurance cover may be impacted by the Year 2000 problem.

In the information sheet -- entitled "The Millennium, What Does it Mean For Me?" which Newsbytes notes applies to insurance worldwide -- the ABI says that, although it is businesses which are likely to be most affected by the change of century, some household appliances may also contain the vulnerable date dependent chips which could fail to recognize dates after 1999.

According to the ABI, in theory, PCs, video recorders, and security systems could all fail to operate properly as a result of the Year 2000 problem, although it notes that manufacturers and suppliers are making every effort to ensure their products are "Millennium-compliant."

The ABI says that losses which occur as a direct result of the Year 2000 problem will probably not be insured, since it is a predictable and foreseeable event. However, some of the unpredictable consequences may be covered.

According to the ABI, the precise level of insurance will vary from company to company, but, in general, policies are likely to give the following cover:

Household Insurance -- individual items which malfunction at the Millennium will not be covered, but if that malfunction has further consequences which cause damage to the structure or contents of the home, insurers would meet the cost of repairs or replacement. The ABI cites an example: if a heating system fails, and pipes freeze and burst, the cost of repairing the electronic controls would not be insured, but the cost of repairing the water damage would.

Motor Insurance -- as with household insurance, it is unlikely that any insurer will cover the cost of replacing a car, or part of a car, if there are any Year 2000 problems. However, in the unlikely event that an accident occurs as a result of that failure, any legal liabilities for third party claims for injury or property damage would be met.

Extended Warranties and Mechanical Breakdown Insurance -- many of these policies will already have specific Year 2000 related exclusions in place, and are unlikely to offer any cover for repair or replacement of items which fail at the Millennium.

Travel Insurance -- delay or cancellation as a result of Year 2000 related failures are unlikely to be covered. However, the ABI says that any further losses suffered during the delay -- if baggage is stolen, or if a policyholder fails ill, for example -- should be insured.

Mark Boleat, the ABI's director general, said that, although businesses, rather then individuals, are likely to be most affected by problems resulting from computer failures at the Millennium, "it is important that policyholders know why their insurances will not generally cover them for Millennium-related losses.

"Insurance is designed to cover the unpredictable and unforeseen. The Millennium is neither -- although some of the consequences may be. And it is these unpredictable and unforeseeable events which some insurance policies will cover," he explained.