The coronavirus crisis continues to generate data that can be valuable for understanding and decision making. Below are just a few resources that may be of interest to insurers and the people and businesses they serve.
Graphs from the University of Texas COVID-19 Modeling Consortium show reported and projected deaths per day across the United States and for individual states.
The Verisk COVID-19 Projection Tool has been made available to enhanceunderstanding of the potential number of worldwide COVID-19 infections and deaths. It provides an interactive dashboard that leverages the AIR Pandemic Model.
Small and medium-size businesses account for roughly 44% of the U.S. economy and provide employment to about 59 million people. McKinsey is tracking their sentiment to gauge how their views on economic activity, employment, and financial behavior—as well as their expectations about financial institutions and public authorities—change as a result of ongoing public and private interventions.
State
workers’ compensation boards around the country are amending rules for benefits
payouts related to coronavirus, and several states have expanded or are
considering widening access to workers comp coverage for COVID-19 beyond first responders
and health care workers.
Kentucky
and
Illinois this week implemented emergency orders to provide access to
public-facing essential workers, such as grocery, pharmacy, Postal Service and
day care workers. And Minnesota’s legislature unanimously approved a bill
that guarantees people in high-risk jobs who contract COVID-19 workers comp
coverage without having to prove the infection was a direct result of their
job. Most licensed peace officers, firefighters, paramedics, nurses, health
care workers, correction officers, workers at secure state facilities, workers
at long-term care facilities, and child-care providers are among the classes
included in the Minnesota measure.
Lawmakers
in Louisiana
and New
Jersey also have proposed legislation to expand COVID-19 coverage beyond
first responders and health care workers, who traditionally are covered if they
are exposed to a communicable disease in the course of their work.
While
employee groups and unions applaud these moves, the changes could hurt the
workers comp industry, some experts warn.
Robert
Hartwig, clinical associate professor and director of the Risk and Uncertainty
Management Center at the University of South Carolina in Columbia, said
the changes present “a potentially enormous and unfair burden on workers
compensation insurers that’s completely unprecedented in history.”
Hartwig pointed to the
difficulty proving that the transfer of a communicable disease occurred on the
job and added, “This is potentially extraordinarily costly to workers comp
insurers, but also to many large employers who have either very high-deductible
programs or are largely self-insured.”
He said these changes
also could be “potentially catastrophic” to workers compensation state funds.
The insurance industry can meet its obligations to policyholders in the midst of the coronavirus pandemic – but government interventions being discussed threaten to unravel this safety net and could make it impossible for insurers to affordably provide essential coverage in the future.
These are among the conclusions shared by Triple-I chief economist Steven Weisbart and senior economist Michel Léonard in a briefing today that explained how the industry already has been affected by the pandemic and subsequent recession; how policyholder surplus ensures funds are available to cover claims; and how any attempt to retroactively apply this pandemic to business interruption policies would cause irreparable harm to the financial stability of the property-casualty insurance industry.
“Insurers price their policies for expected claims, with additional monies set aside for unexpected claims, such as those which are filed during exceptionally severe hurricane seasons,” Dr. Weisbart said. “The policyholders’ surplus backs up every line of insurance each insurer writes. It is calculated as assets, minus liabilities, and rises and falls due to changes in asset values.”
Dr. Weisbart and Dr. Leonard explained in detail how surplus works and showed how – under a variety of plausible scenarios – retroactively rewriting insurance contracts could make it impossible for insurers to play their critical role as financial first responders.
“If insurers nationwide had to pay business interruption policy claims for which they collected no premium, it could cost the industry each month anywhere from roughly $150 billion to nearly as high as $380 billion,” said Léonard, noting that the smaller amount accounted for the U.S.’s small and medium-size businesses that currently have business interruption coverage and the larger amount includes those who do not. “Pandemic-caused losses are excluded from standard business interruption policies because they impact all businesses, all at the same time.”
As car insurers help their
customers cope with the pandemic’s economic impact through premium refunds and other relief measures and some groups complain the
efforts are insufficient and ask regulators to make insurers pay more, it’s
worth noting that the cost of insuring motor vehicles has grown more slowly than inflation over the
past 12 months and well below prices for hospital services and car repairs –
two key drivers of car insurance claims.
As the chart below shows,
year-over-year increases in auto insurance prices have trailed growth in the Consumer
Price Index, the most widely used measure of inflation.
“Auto premiums are kept relatively low by competition among insurers,” explained Triple-I chief economist Steve Weisbart. “This has been happening even as two major contributors to claims have grown much faster. In the case of hospital services, prices have not just been rising – growth has been accelerating since last July.”
You read that right. Even as two of the biggest contributors to claims – the money insurers pay policyholders after accidents – have grown faster than inflation, the prices policyholders pay for coverage have grown more slowly than consumer prices generally.
Many factors come into play when an insurer determines an
individual’s premium
payment – age, driving record, where and how far one generally drives, and
much more; and, let’s face it, no one likes to pay for insurance or to see
their payments go up.
But think about it: even though you might roll the dice if
your state didn’t require you to have insurance, would that really be a wise
move? Would you really want to be on the hook for the full cost of damage to
your car or that of another driver? Or for the liability associated with someone’s
injury or death?
That premium payment provides an awful lot of value in terms
of peace of mind – IF you think about it.
And, if you think further about it, you have more control over how much
you pay for car insurance than you do over other products and services. You can shop around. You can change how much
or what type of coverage you buy. You can bundle auto with other coverages. You
can get fewer tickets and improve how you handle your credit.
And as usage-based
insurance, powered by telematics, gains traction, your options will only increase.
Compare this with, say, cable and satellite TV. Your ability
to shop around is quite limited (though improving with each new streaming
opportunity that comes online). The products you really want come bundled with
others you would never pay for if you had a choice.
And the prices of these services, as the chart below shows,
continue to grow at rates well above both CPI and car insurance.
