Hundreds of childcare centres will be paid out tens of millions in insurance for loss of income during the COVID-19 crisis because they have a special arrangement with their broker, but other businesses will get no insurance.
The unusual deal means individual childcare operators will get a payout of up to $62,500 each. However broker Crombie Lockwood says there will be no COVID-19 cover for any new or renewed policies.
More than 1500 childcare centres, kindergartens and play centres have insurance cover through Crombie Lockwood.
Those with business interruption cover under their Child Proof scheme policies will receive up to 25 percent of annual turnover of up to $250,000. If each of those businesses receive the maximum amount the total payout is nearly $94 million ($93,750,000).
Crombie Lockwood would not be interviewed but its website says it has been working with the insurance giant Lloyd's of London to ensure that all Child Proof policyholders are honoured up to the expiry date of their existing policies.
"The policy will reimburse you for lost income during the period of ordered closure. This may include a loss of parents' fees, WINZ subsidies, any other subsidies and any reduction in [Ministry of Education] bulk funding during the closure period," the statement on its website says.
"The maximum limit is 25 percent of annual turnover up to $250,000, with a 48-hour excess - no cover for first two days of closure. The limit applies to each site.
"Crombie Lockwood has been working with Lloyd's of London to ensure that all Child Proof policyholders are honoured up to the expiry date of their existing policies. However, a COVID-19 exclusion will be applied for new policies and future renewals. This exclusion is not unique to our scheme but is being applied to pandemic policies worldwide by insurers."
Early Childhood Council head Peter Reynolds said the money would be crucial to centres which were under financial stress.
About 86 percent of 1300 of its members are insured with Crombie Lockwood.
The Government is continuing its subsidies to early childhood centres but it is up to each service to decide if they will continue to charge families while they are shut down.
"Its been our recommendation to our members not to charge parents fees but we realise that puts them at considerable stress. They're having to struggle with this, they're having to do their sums right now and see just how long they can survive," Reynolds said.
Insurance council chief executive Tim Grafton said the Crombie Lockwood deal for childcare centres was very unusual.
"This arrangement is very unusual. By far almost all business interruption policies these days and for a number of years have had an exclusion in them for pandemics, and they have exclusion for war and other things that are just too catastrophic and astronomical in their costs to be able to insure," Grafton said.
Insurance companies rewrote their policies after being hit by huge costs from SARS 17 years ago.
Since then, individual businesses may have negotiated specific pandemic cover but traditional business interruption insurance only covers actual damage to property.
"If six months ago I came along and said, 'Hi do you want to buy pandemic insurance in case the whole world closed down', you'd get laughed out of court, no one would be purchasing that policy because they would think it would never have happened, but today it has happened," he said.
Little School owner Maria Johnson insured her seven preschools through Crombie Lockwood for many years but switched brokers because she got a better deal.
She said she wouldn't get a business interruption payout and was "devastated, disappointed".
"It is a real shame when you pay insurances and you have business interruptions that insurance companies aren't coming to the party," she said.
She had been in the childcare business for 17 years and survived the SARS outbreak but this is much worse.
"I'm feeling confident that we will be able to last two to three months but if it is pushed out any longer I don't know if we will be able to open our doors again."