THOUSANDS of Scottish businesses who have renewed their insurance policies are likely to have seen cover removed or premium costs increase due to the the Covid-19 pandemic, experts have warned.

A leading independent expert of commercial insurance estimates that more than 35,000 traders in Scotland will have renewed their insurance policies at the end of March or beginning of this month - and are likely to have seen their costs rocket or new policies not cover coronavirus.

Mactavish thinks that around one in five Scottish businesses registered with VAT or PAYE are likely to be affected.

At least five commercial insurers have removed cover from their policies due to the coronavirus outbreak.

Earlier this month, the Herald on Sunday revealed that more than 320,000 businesses in Scotland will have no form of insurance to cover them during the pandemic.

READ MORE: Coronavirus in Scotland: More than 320,000 Scots firms have no insurance for Covid-19

Bruce Hepburn, CEO of Mactavish said: “There has been talk of insurers potentially excluding cover linked to the fall-out of infectious diseases from commercial insurance policies, and we are beginning to see this unfold.

"Over the past few weeks, many businesses in Scotland and elsewhere in the UK would have received insurance offers and accepted them, but at the last minute, just days or even hours before renewal, elements of their cover were removed.”

Mactavish has warned that this time of year is the busiest for companies renewing their insurance policies, but the organisation's research reveals that at least five commercial insurers have just removed cover from their policies because of Coronavirus.

It has also seen clients faced with significant premium increases for their renewals. Mactavish has stressed that insurers are not only removing cover associated with infectious diseases going forward, but also retrospectively.

The Association of British Insurers (ABI) has warned that only 10% of traders across the country have business interruption insurance which covers pandemics and only some of the one in 10 will have policies which include any "notifiable disease".

Firms which do have specific disease cover are also struggling to claim funds, leading to politicians calling for insurers to step up and stop “passing the buck” to avoid paying out those who believe they are entitled to a claim.

A spokesperson for the ABI said: "Insurers know that this is a very worrying time for businesses. While most business insurance does not cover for pandemics, overall UK insurers expect to pay over £1bn in Covid-19-related claims.

"Unfortunately, no country in the world has an insurance market that is able to offer widespread pandemic cover.

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"Forcing insurance companies to pay for risks that aren't covered in contracts would be a shortcut to their insolvency. "Given the sheer scale of economic impact, extensive pandemic insurance cover can only happen with some form of government support, and we need a debate about how this can best be achieved in the future."

The SNP has called on the UK Government to close any gaps in insurance claims.

SNP MP Alison Thewliss said:“There are growing concerns that many small and medium sized businesses face being left out in the cold and pushed into hardship, as some insurers have quickly moved to tighten up the wording of their terms and conditions to exclude Covid-19 from policies.

“It has been a month since I asked the Chancellor to stand behind businesses left without cover by their insurers and so far, no support has been forthcoming. Many businesses have paid their insurance policies dutifully and were relying on that cover in order to stay afloat during these challenging times.

“When I also raised this issue with the Chancellor back in March, it was made unequivocally clear, that for businesses without the requisite cover it is important that the UK government think more broadly about direct support for businesses - yet this has been sorely lacking."

She added: “Many responsible businesses have taken prudent and practical steps of taking out an insurance policy to protect against unforeseen events – such as the outbreak of a virus – it now seems incredible that insurance companies can suddenly abandon their responsibilities in this way.

“Insurance policies which cover smallpox – eradicated over 40 years ago – but not Covid-19 gives little comfort to those who have had to close their doors and furlough staff on the instruction of public authorities.

“While I don’t ask insurers to retrospectively change policies, it is clear that the UK government must seriously look at steps to act as an insurer of last resort to cover the evident gaps in these policies and protect struggling businesses across the UK”.

Liz Cameron, chief executive of the Scottish Chambers of Commerce, said: “The Covid-19 pandemic is an unprecedented crisis in modern times, that is causing widespread economic harm to business communities across the country.

"We would continue to urge brokers and insurers to be as co-operative and understanding as possible with businesses, in light of the daily struggles that they are already facing.’’