Bumper payouts, relief measures and the price of defiance
From Wednesday, UK lockdown measures showed the first signs of easing as the Government began to pave the way to economic recovery. Businesses are encouraged to return to work where safe to do so, house buyers can begin viewing properties and completing purchases again and most importantly, we can take unlimited safely-distanced outdoor exercise which could herald great things for the next Olympics…
But as we take stock and the industry begins to start counting the costs of Covid-19, a stark picture is emerging.
The biggest payout since 9/11
Lloyd’s has said that it’s facing a $3 - $4.3 billion (£2.5-£3.5bn) payout for claims related to coronavirus, the biggest payout for the market since the 9/11 attacks in 2001.
The BBC reported that nearly one third of insurance losses is expected to come from the cancellation or postponement of major world events. These include the Tokyo Olympics, which Swiss Re has already admitted could cost them $250m if the event is cancelled altogether, and Wimbledon, which is expected to cost insurers over $100m in pandemic insurance payouts.
As for the industry as a whole, Lloyd’s estimates that the total underwriting losses could hit $107bn (c.£88bn).
Claim to shame
The true test of an insurance policy comes when a claim is raised, but many policyholders will have found themselves disappointed at the handling of their Covid-19 related claims.
Insurance Age shared the results of their Broker Resilience Survey this week and it was bad news for claims. When asked about their claims experience, nearly half of the brokers surveyed ranked the service they’d received as poor or very poor, citing unfair repudiations and slow response times as some of the reasons for their bad experience.
The impact of the current pandemic has certainly underlined the importance of innovation in claims. Insurers will surely be looking at their current processes and considering where investment in new technologies such as automation and AI could improve the customer journey and make the business more resilient to events of this nature.
A little relief for policyholders
While many people are financially struggling with the impact of coronavirus, the FCA announced this week that it is implementing a series of temporary measures to support policyholders.
Forbes reported on the measures that will require firms to:
- Reassess customer risk profiles
- Advise on whether their products meet their customers’ needs or if there are any that may be more suitable for them during this time
- Waive cancellation and mid-term adjustment fees
- Offer payment deferrals to customers if any of these changes do not alleviate their temporary payment difficulties
Motor insurers have been widely criticised for continuing to take premiums from customers who are either not driving at all or driving significantly less as a result of the lockdown, whether these measures will slightly improve policyholder opinions on the industry will remain to be seen.
A worrying trend
As if businesses didn’t have enough to worry about, the coronavirus pandemic has seen a surge in cyber attacks as criminals move to take advantage of the security vulnerabilities created by remote working, a reduction in IT staff and distracted employees.
Law360 reports that as a result, insurers and brokers are seeing a spike in both claims, and enquiries from businesses concerned about their cyber exposures.
Clients have previously told us they feel that brokers should be doing a better job of educating their customers on why cyber cover is so important, smaller businesses particularly may not feel they are big enough to be targeted and don’t see the need for additional cover.
For all businesses, now may be the best time to take stock and review security vulnerabilities and ask whether their cover will really protect them in the event of a breach.
The price of defiance
Much has been reported about the position of businesses forced to close during the pandemic and whether their policy covers business interruption. But what of those businesses that choose to remain open despite being ordered to go into lockdown?
This was a matter addressed by the Governor of Pennsylvania this week as reported in Insurance Business America. Amid discontent over some counties in the state being in lockdown and others allowed to open with distancing measures in place, some local businesses are defying the ban and choosing to reopen prematurely.
In a stark warning by Governor Tom Wolf, businesses were warned that if they do not abide by the law, they will “no longer be eligible for business liability insurance and the protection it provides”.
Good news for MGAs
Finishing on a positive note, the MGA sector was the subject of broker praise this week as Insurance Age asked, ‘Are MGAs outperforming insurers in responding to the crisis?’
Speaking to a collection of brokers, MGAs were praised for being more flexible and willing to write business than composites. The business model lends itself well to adapting to change and although when it comes to claims they are still bound by the limitations of their capacity provider, their speed of response and ability to find new solutions to problems could see them gaining yet more prominence in the market.
With thanks this week to:
BBC News - https://www.bbc.co.uk/news/business-52659313
Insurance Age - https://www.insuranceage.co.uk/broker/7512186/brokers-lament-abysmal-claims-experience-during-covid-19
Insurance Business America - https://www.insurancebusinessmag.com/us/news/breaking-news/pa-governor-warns-insurance-will-not-cover-local-businesses-defying-pandemic-shutdown-order-222369.aspx