Category Archives: Insurance Industry

This is the default category

Disaster Resilience, Flood Insurance, Insurance Industry

Swiss Re: A Katrina-like hurricane could cause up to $200 billion in damage today

Leave a comment
A memorial cross for the victims of Hurricane Katrina stands in the water near the bank of the Mississippi River Gulf Outlet on August 22, 2019 in Shell Beach, Louisiana. According to researchers at the National Oceanic and Atmospheric Administration (NOAA), Louisiana’s combination of rising waters and sinking land give it one of the highest rates of relative sea level rise on the planet. (Photo by Drew Angerer/Getty Images)

Hurricane Katrina, which struck the United States in August 2005, remains the costliest insured North Atlantic hurricane on record and the most expensive natural catastrophe for the global re/insurance industry.  In 2020 dollars, according to a Swiss Re  report released today, total economic damage from Katrina totaled more than $160 billion.

An identical storm today “could easily reach” $200 billion, Swiss Re says.

To evaluate what Hurricane Katrina might look like in 2020 in terms of insured and economic losses, Swiss Re ran Katrina’s 2005 wind and surge footprint on its U.S. market portfolio using its probabilistic tropical-cyclone loss model.

“If Hurricane Katrina were to hit the U.S. in 2020 with the same wind and storm surge as 2005, but with current exposure information and updated flood protection and vulnerability assumptions, the privately insured losses in the U.S. alone could rise to $60 billion,” the report says. “This is true, despite the city (New Orleans) currently only having 80% of the population it did in 2005.”

Private insurance and the federal flood insurance program covered about $86 billion of the total loss, highlighting a protection gap largely driven by uninsured flood losses. Standard residential insurance policies exclude coverage for flood damage resulting from surface water, including storm surge caused by hurricanes; separate flood insurance policies are available through FEMA’s National Flood Insurance Program and private insurers.

“With Katrina, and even more recently with Harvey and Sandy and Florence, we’ve seen this profound protection gap where on average only one in six residences in the U.S. have a flood coverage policy,” said Marla Schwartz Pourrabbani, a Swiss Re natural catastrophe specialist and lead author of the report.

Today, a storm like Katrina would cause closer to $175 billion in damage because areas outside New Orleans, especially in other coastal states, have seen both increases in population and increased investments along the coast that add to the financial risk. Rising sea levels also contribute to the potential losses.

Swiss Re says the effects of climate change could drive total costs  higher.

“Considering that sea level in the barrier islands near New Orleans is now rising by over one inch every two years, a six-inch increase in sea level — and an event like this could happen in just over a decade,” the report says.

Insurance Industry, Insurers and the Economy

Recession, Pandemic to Impact P/C Underwriting Results, New Report Shows

Leave a comment

The COVID-19 pandemic and the recession it started will result in no premium growth for 2020 and a deteriorated combined ratio for the property/casualty industry, according to the new report, Insurance Information Institute (Triple-I) / Milliman P/C Underwriting Projections: 2020-2022. 

Sean Kevelighan

Direct and net premium written will be virtually unchanged from 2019, while the industry combined ratio, a measure of underwriting profitability, is projected to rise to 102 at year-end, up from 99 last year, according to the report, a joint venture of the Insurance Information Institute and Milliman, a provider of actuarial and related products and services. The report, to be published quarterly, was unveiled on August 13 at an exclusive members only virtual webinar moderated by Triple-I CEO Sean Kevelighan.

James Lynch

“The pandemic and the recession it induced drove down exposures in personal auto and several commercial lines,” said James Lynch, FCAS, senior vice president and chief actuary with the Insurance Information Institute (Triple-I). “Overall premiums are projected to be flat,” said Lynch, adding, “a hard commercial lines market is driving rates higher, which offsets some of the deterioration in exposure.”

Jason Kurtz

“Though there is tremendous uncertainty as to size, the pandemic creates insurance losses that were not contemplated in either catastrophe or attritional pricing,” said Jason Kurtz, FCAS, a principal and consulting actuary at Milliman. “Not surprisingly, pandemic losses can cause underwriting results to deteriorate.”

The report noted that a number of legislative and regulatory proposals have the potential to affect pandemic exposures and losses.

A major hurricane or cumulatively severe wildfire season could also impact the combined ratio, the report noted. Right now, the report projects a typical year for catastrophe losses, though most hurricane prognosticators predict more storms than average.

Other Areas to Watch

Other areas to consider include the impact of the pandemic on workers compensation, particularly the shift in the burden of proof onto the employer for certain types of claimants (i.e. presumption) and the changing exposure from people working from home.  Workers compensation saw five consecutive years through 2019 where that line of business posted an underwriting gain; that could change with COVID-19. 

Economic trends also play a role. The report assumes that exposures roughly grow and shrink with the economy. If the recovery is slower or faster than projected, premium growth will be affected.

The report is an analysis by Triple-I and Milliman based on an actuarial model that relies on information from a number of publicly available sources as well as input from thought leaders and experts at both organizations. It predicts that premiums will grow 7 percent in 2021 and 6 percent in 2022 as the economy recovers, and the combined ratio will fall to 99 for both years as the industry prices for the effects of the pandemic and the higher rates charged this year earn out.

The complete webinar, available exclusively to Triple-I members, projected underwriting results for several lines of business: personal auto, homeowners, commercial auto, general liability, property, commercial multiperil and workers compensation.


Insurance Industry

Hurricane Isaias follow-up: 8/11/2020

Leave a comment
PSE&G workers work on power lines after Tropical Storm Isaias passed through on August 4, 2020 in Bogota, New Jersey. (Photo by Eduardo Munoz Alvarez/Getty Images)

Thousands of East Coast residents were still without power a week after Tropical Storm Isaias barreled through more than 12 eastern states, including New York and New Jersey, on August 4.

Isaias made landfall in North Carolina on August 3 as a Category 1 hurricane, with maximum sustained winds of 85 miles per hour before weakening to a tropical storm. Damage to Caribbean islands and along the U.S. Atlantic coast stemmed from flooding, power outages, downed trees, and tornadoes.

Isaias was the fifth named storm of the “extremely active” 2020 hurricane season.  Preliminary insured loss estimates from Isaias range from over $1 billion (Aon) to $4 billion (Karen Clark & Co.) Damage is still being tallied, and these estimates are likely to change.

Like every disaster, Isaias will give rise to criminal activity. The National Insurance Crime Bureau (NICB) reminds us that crooks posing as contractors may press homeowners into paying out their insurance claim before repairs are completed. Once they collect the payment, they disappear without completing the promised work. To keep from becoming a victim of these contractor scams, follow these tips from the NICB. The tips include getting more than one estimate and getting everything in writing.

Another post-disaster scam is the sale of flooded vehicles. Dishonest dealers can buy flooded vehicles, clean them up and sell them to unsuspecting buyers. If you are shopping for a used vehicle, NICB recommends checking a few items, such as water stains and mildew that could indicate whether the vehicle is a flood recovery vehicle or not.

NICB also provides a free tool called VINCheck that allows consumers to check a vehicle for a “red flag,” such as theft, accident damage, or salvage titles.

Disaster Preparedness, Insurance Industry

2020 hurricane forecast updated: “Extremely active” season expected

Leave a comment

The 2020 Atlantic hurricane season activity is projected to be “extremely active,” according to Triple-I non-resident scholar Dr. Phil Klotzbach.

Dr. Klotzbach, an atmospheric scientist at Colorado State University (CSU), and his team issued an updated forecast on August 5. They project the 2020 Atlantic hurricane season will have 24 named storms (up from 20 in the previous forecast), 12 hurricanes (up from nine), and five major hurricanes (up from four).

The 24 named storms include the storms that have already formed. An average season has 12 named storms, six hurricanes and three major hurricanes.

The activity is driven in part by reduced vertical wind shear. Strong wind shear tears apart hurricanes. Observed wind shear has been very low in July, which means it’s also expected to be low at the peak of the season from August to October.

The probabilities of U.S. hurricane landfalls are also elevated simply because we are expecting more Atlantic storms. The U.S. has already experienced two landfalls this season with Hanna and Isaias.

People in hurricane-prone areas are advised to have a plan in place and follow the directions of local emergency managers if storms threaten.

Please click on the links below for Triple-I’s hurricane preparedness guides:


National Hurricane Preparedness Week
Hurricane Season Insurance Guide
How to Prepare for Hurricane Season
What to do When a Hurricane Threatens
Video: Create a Home Inventory
Video: Hurricane Insurance Guide

Business Insurance, Insurance Industry

Chubb CEO says business interruption policies are a good value and work as they should

Leave a comment
Evan Greenberg

In a July 29 earnings call Evan Greenberg, the CEO of Chubb, addressed the lawsuits filed by many businesses over business income (interruption) coverage during the COVID-19 pandemic. He stressed that even though business interruption (BI) policies do not cover a pandemic, they are a good value and work as intended.

“Standard BI policies, which are an addendum to a fire policy, require direct physical loss or damage to the property, for example, a fire or flood damages the property and prevents the business from operating while repairs are being made.  COVID-19 does not cause physical loss or damage to a property, despite the trial bar’s efforts to influence some government officials in the wording of their civil public shutdown orders,” he said.

Greenberg reiterated the uninsurable nature of pandemics and the necessity for the federal government to take the lead in mitigating pandemic risks. To properly service all policyholders, Greenberg said, the insurance industry must not be distracted by attacks from the legal community.

The comments appear in their entirety below.  

Remarks from Evan Greenberg, Chubb Second Quarter Earnings Call, July 29, 2020

I am going to say a few words about the business interruption issue that I know is on the minds of many.  As you know, the insurance industry is under attack by the trial bar over business interruption claims.  They represent many businesses which purchased BI coverage that does not provide cover for pandemic, and these customers are understandably disappointed and upset.  Plaintiff attorneys are attempting to torture or reverse engineer insurance contract language to conjure up business interruption coverage that for the most part simply doesn’t exist. 

Coverage for a pandemic was never contemplated in standard business interruption policies, and therefore no premiums were ever charged for that risk.  In fact, state insurance regulators, who approve the policies, have been clear that this risk is not covered and that the industry could not cover the massive open-ended tail risk of a global pandemic because it threatens the industry’s solvency.  Without the federal government playing a major role to cover the tail risk, pandemics are simply uninsurable on a broad basis.

Standard BI policies, which are an addendum to a fire policy, require direct physical loss or damage to the property, for example, a fire or flood damages the property and prevents the business from operating while repairs are being made.  COVID-19 does not cause physical loss or damage to a property, despite the trial bar’s efforts to influence some government officials in the wording of their civil public shutdown orders. 

Though it doesn’t cover pandemic, standard BI coverage provides good value for the money.  We estimate the industry pays out about 70 cents in insurance claims for every business interruption protection dollar collected, with most of the remaining amount paid in commissions, premium taxes and other expenses.   For Chubb, in addition to our normal losses this year, we will pay BI claims for policies that specifically covered certain pandemic-related shutdowns such as those for the entertainment industry.

We care deeply about properly supporting and servicing all of our policyholders, and I have particular sympathy for the millions of businesses that have suffered terribly during the pandemic-forced economic shutdowns.  But it would be wrong – in fact, catastrophic and irresponsible – to pay the claims of those who didn’t have coverage, and in fact didn’t pay premiums for the coverage, by using funds that have been properly reserved for the legitimate claims of the vast majority of our P&C policyholders who number over 100 million globally. 

To provide some context, in 2019, Chubb paid $24 billion on approximately four million property and casualty claims.  Again, to pay billions of dollars in uncovered claims by raiding the reserves or capital needed to pay claims on other kinds of policies, such as auto and home, commercial insurance exposures, or respond to natural catastrophes such as hurricanes and wildfires, would be irresponsible to the vast majority of our policyholders and to our shareholders.

Beyond the business interruption challenges of the current COVID-19 crisis, the insurance industry has an important role to play in society and in the economy, and that includes fully participating in the development of a prospective future pandemic business interruption solution should crises arise.  Earlier this month, Chubb released its Pandemic Business Interruption Program designed to mitigate the economic disruption and losses in the event of a future pandemic.

Our framework is not the first plan to be introduced. But the public-private partnership framework we developed has important differences from the other leading proposals. By sharing our ideas and approach, we hope to spark and influence a productive debate on a solution that will work for businesses of all sizes, taxpayers, our industry and the economy more broadly.

First and foremost, I believe the industry can and should take pandemic risk along with the government.  This is a peril that can be covered to a greater degree than we do today as long as the tail exposure is covered by the government.  It’s our job to figure out how to do that.  We can do more than simply play an administrative role or we belittle ourselves and we’re less relevant than we can or should be. 

The framework we announced has attributes that we believe will make for a successful program.  It accounts for the different needs of small, medium and, to a modest degree, large businesses. Premiums for small business will be affordable and they will be paid quickly. Larger companies would pay a fair and risk-adjusted price to both the government and insurers for pandemic cover in a program built on free-market principles.  The government gets paid for the use of its balance sheet – it’s not a handout to larger companies.

Our framework has incentives for broad participation by the industry. And by committing insurance industry capital and providing opportunity for increased risk-sharing over time as direct and secondary markets develop, the pandemic burden shouldered by the government will ultimately be lessened to a degree.

This is an important issue for our nation.  We look forward to contributing to the dialogue as policymakers work to refine the most effective solution.

Careers and Employment, Insurance Industry, Technology

Insurance Careers Corner: Q&A with Rahel Abraham, ClimaGuard

Leave a comment

By Kris Maccini, Social Media Director, Triple-I

Triple-I’s “Insurance Careers Corner” series was created to highlight trailblazers in the insurance industry and to spread awareness on the career opportunities within the industry.

This month we interviewed Rahel Abraham, CEO of ClimaGuard, a Houston-based start-up that provides protective coverings for cars (and personal belongings) to prevent valuable losses from flood damage. Rahel shared her inspiration for creating ClimaGuard, her experiences as a first-time entrepreneur, and how she prepped her business for hurricane season, amid a pandemic.

Name: Rahel Abraham

Current Role: Founder & CEO, ClimaGuard

Years at Company: 2 years

Tell me about ClimaGuard. What led you to start the company in 2018?

The idea of ClimaGuard came about a month after Hurricane Harvey. This event was a historical devastation – not only were residential homes flooded, but many businesses and vehicles were flooded also. I lost my car, and there was a shortage of rental vehicles. Living in Houston, I depend on my mobility – being vulnerable post the hurricane was a challenge. I realized that I needed help, and so did many of my neighbors.

Shortly after the storm, a friend and I thought of an idea to produce a protective covering. As more hurricanes hit, we realized that flood mitigation wasn’t going to be solved overnight, but that we could come up with a way to help people safeguard themselves in real time. My background prior to ClimaGuard was in Engineering, so I knew that I had the background to create a product that would work.

ClimaGuard protective coverings can be used for other purposes outside of automobiles. I have a client who used it to protect a grandfather clock that was passed down through generations. I wanted the covering to be large enough to fit a car, but easy enough to use for quickly packing other valuable items in the home – sofas, electronics, tables, etc.

As CEO, what’s top of mind as you look to grow your business?

There are two goals that are top of mind: 1.) Spread awareness about flood risks, and 2.) Encourage and empower at-risk communities to proactively mitigate. Education in creating awareness for disaster planning and mitigation is vital to the growth of ClimaGuard. Whatever life looks like post-event – whether it’s running for home supplies, shopping for groceries, or accessing temporary living (hotel) – you need mobility, and, more importantly, peace of mind throughout the event.

It wasn’t until I got flooded that I understood the challenges post-flooding, and the financial costs to recover. I was fortunate to have a support system, but I know individuals who are still trying to recover three years after Harvey. I’m focused on preparing individuals and communities to get back up and running as soon as possible.

Being a woman and Black-owned business, what challenges have you faced in growing the company?

I didn’t know anyone personally who ran a successful product-based company, or any start-up, in general. I quit my job to pursue my business, so my cash flow was limited. I relied on my savings in the beginning, because I didn’t know how to seek funding. I was concerned that I would lock my business into a situation that would prevent it from thriving, if I didn’t partner with the right people. Because I didn’t have the network here, I went overseas to build partnerships, understand manufacturing, and learn how to create opportunities.

What activities have you been involved in to help build networking and partnerships?

Prior to COVID-19, I was part of an accelerator program called DivInc out of Austin, Texas. Austin is a great community for start-ups, and I wanted to be in the mix among entrepreneurs who were also starting from the ground up. After completing that program, I began outreach specifically to dealerships and the insurance industry. These two markets have proven to be good partnership opportunities for ClimaGuard. With insurance, my goal is to touch on the fleet business, the rental car space, and the commercial and residential customer base. With the dealerships, I am seeking access to the residential and commercial buyers who are invested in protecting their assets.

[ClimaGuard is currently a participant in Triple-I’s Resilience Accelerator]

What advice would you give to aspiring entrepreneurs in seeking opportunities and overcoming challenges? 

Just like your ingenuity led to an idea that solves a real problem, that same creative thinking will lead you to solutions to overcome your challenges. Your path is your own, and you don’t need millions of dollars to make your start-up successful. You do not need a proven track record to show you are capable. It’s not a sprint, it’s a marathon, so don’t burn yourself out.

2020 is expected to be one of the worst hurricane seasons on record and the pandemic will bring about new challenges in disaster prep. How have these challenges impacted your business? How are you preparing for the season?

Currently, the nation is highly focused on COVID-19. The lack of attention to this hurricane season concerns me, however we are living in very unusual and uncertain times. Many of us, myself included, are taking things day by day. I’m trying to be observant of the climate and the emotional health of our communities. In terms of preparedness during hurricane season, I know that hurricanes and flash flooding only allow a few days of notice before hitting an area. I’ve ensured that ClimaGuard inventory is ready, and I’m prepared to ship units (with the available supply) through a local fulfillment business in Houston. ClimaGuard’s mission is to prevent loss from natural disasters, and we’re ready this season and preparing for next season. Our goal is increase inventory next year as we develop more opportunities with partners and retailers.

Insurance Industry

Property/Casualty Insurance Industry Suffered Largest-Ever Drop in Surplus in the First Quarter of 2020

Leave a comment

Insurers Face Multiple Challenges as Impacts of COVID-19 Continue to Unfold

The surplus for the private U.S. property/casualty insurance industry dropped by $75.9 billion in the first quarter of 2020—its largest-ever quarterly decline—as the stock market suffered a major downturn, according to Verisk (Nasdaq:VRSK), a leading data analytics provider, and the American Property Casualty Insurance Association (APCIA). Since then, the COVID-19 pandemic has continued to affect many insurers and will likely impact underwriting results for the second quarter and the remainder of the year.

The surplus fell to $771.9 billion as of March 31, 2020, from the record-high $847.8 billion at the end of 2019. This drop was mostly driven by a decline in valuations of insurers’ investments. While the decline set surplus back to mid-2018 levels, traditional leverage ratios remained below their long-term averages.

Other industry results remained steady or improved from a year earlier. Net income after taxes in first-quarter 2020 was $17.9 billion, essentially the same as in first-quarter 2019. The net underwriting gain in the first quarter was $6.3 billion, a 19.9% increase from a year earlier. Net written premiums increased to $164.4 billion in first-quarter 2020 from $154.7 billion in first-quarter 2019—a 6.2% increase.

While having no apparent effect on first-quarter underwriting results, the COVID-19 pandemic and associated economic disruptions have affected many insurers, and the impact goes beyond the investment losses reported in the first quarter. Based on what is already known about the first half of 2020 and on available forecasts, significant changes are expected in insured exposures as well as in the amount and mix of claims. Verisk research estimates that personal auto insurers have offered more than $13 billion in policyholder rebates and credits. MarketStance, a Verisk solution, estimates that at least 1 million insured businesses in the United States will fail in 2020, and direct written premiums in commercial lines will decrease 2.8%.

“The historic drop in industry surplus in the first quarter was concerning for many insurers, as it began to show the impact of COVID-19 on their results,” said Neil Spector, president of ISO. “But the impact of COVID-19 on the industry is just beginning to unfold. Will personal auto insurers see the reduction in losses matching the policyholder rebates and credits offered this spring? To what extent will commercial lines premiums be affected by the challenges facing the economy? How will insurers adapt and continue to serve their customers efficiently in our new normal?”

Verisk recently created an online resource page at verisk.com/insurance/covid-19/ to help insurers learn about new regulations, read about critical insights, and discover new products being created to address the effects of COVID-19. It also recently launched a web page that provides strategies for personal lines insurers in the new normal: verisk.com/newnormal.

“Property/casualty insurers started the year with solid net written premium growth, but that was the calm before the storm,” said Robert Gordon, senior vice president for policy, research and international at APCIA. “By the end of the first quarter, insurers experienced their largest-ever quarterly surplus decline as the stock market suffered its largest drop since 1987 and interest rates reached a record low. While the industry remains safely capitalized, many individual insurers face potentially significant unknown coronavirus liability exposures, as well as political and regulatory threats of mandated retroactive and prospective COVID-19 coverage.”

View the full report from Verisk and APCIA here.  

About Verisk 
Verisk (Nasdaq:VRSK) is a leading data analytics provider serving customers in insurance, energy and specialized markets, and financial services. Using advanced technologies to collect and analyze billions of records, Verisk draws on unique data assets and deep domain expertise to provide first-to-market innovations that are integrated into customer workflows. Verisk offers predictive analytics and decision support solutions to customers in rating, underwriting, claims, catastrophe and weather risk, global risk analytics, natural resources intelligence, economic forecasting, and many other fields. Around the world, Verisk helps customers protect people, property, and financial assets.

Headquartered in Jersey City, N.J., Verisk operates in 30 countries and is a member of Standard & Poor’s S&P 500® Index and part of the Nasdaq 100 Index. For more information, please visit www.verisk.com.

About APCIA
Representing nearly 60 percent of the U.S. property casualty insurance industry, the American Property Casualty Insurance Association (APCIA) promotes and protects the viability of a competitive private insurance market for the benefit of consumers and insurers. APCIA represents the broadest cross section of home, auto, and business insurers of any national trade association. APCIA members represent all sizes, structures, and regions, which protect families, communities, and businesses in the U.S. and across the globe. For more information, visit www.apci.org.

Contact:

Joe Madden for Verisk
Joseph.Madden@verisk.com
201-232-4486

Jeffrey Brewer for APCIA
jeffrey.brewer@apci.org
847-553-3763

Loretta Worters for I.I.I.
lorettaw@iii.org
212-346-5575

Insurance Industry

Close call for Hawaii as Hurricane Douglas passes

Leave a comment

Hurricane Douglas brought heavy rain and 90 mph winds to parts of Hawaii on Sunday July 26 as the Category 1 storm passed north of Maui and Oahu, avoiding a direct hit. Some bands of heavy rain with gusty winds did affect both islands.

Although landfalling hurricanes are rare in Hawaii, residents are still advised to know what to do before, during and after a hurricane.

Hawaii homeowners and renters insurance policies usually provide coverage for almost all standard perils (e.g., fire, explosion) and liability; however, some policies exclude hurricanes.

In Hawaii, homeowners and renters generally purchase hurricane and flood insurance policies separately to protect their property from those specific natural disasters and supplement their homeowners and renters insurance policies.

“In addition to encouraging consumers to buy the appropriate coverage, the Triple-I has been outspoken about the need to bridge the flood insurance coverage gap and build more resilient communities through its Resilience Accelerator,” said Sean Kevelighan, CEO, Insurance Information Institute. “In fact, the average take-up rate for flood insurance in the entire state of Hawaii is 12.6 percent, which is an alarming recovery gap for citizens.”

Only a flood insurance policy, available through FEMA’s National Flood Insurance Program (NFIP) and some private insurers, can protect a homeowner, renter, or business from flood-caused property damage. Most U.S. natural disasters involve flooding, and standard homeowners, renters, and business policies do not cover flood-caused damage.

An auto insurance policy’s optional comprehensive provision covers wind, hurricane, and flood-caused property damage to vehicles. 

Insurance Industry, Webinars, Workers Compensation

COVID-19 and Workers Compensation: Impact Will Become Clearer … Eventually

Leave a comment

By John Novaria

The impact of COVID-19 on workers compensation will come down to several fundamental questions in the coming months: Who’s at work? Who’s going back to work? And under what circumstances?

Experts addressed these questions during a webcast jointly sponsored by Triple-I and the National Council on Compensation Insurance (NCCI). The discussion was moderated by Mark Friedlander, director of corporate communications, Triple-I.

While they agreed it’s too early to know all of the impacts of the virus on workers compensation, several important themes are emerging.

Sean Cooper, practice leader and senior actuary, NCCI, said the economy has experienced sudden job losses, compared to the Great Recession of 2008-09, when they were spread out over a period of time, and the nature of those jobs is much different.

“Back then you saw construction and manufacturing impacted greatly, while this time it’s hospitality, leisure and travel,” he said.

Cooper explained some of the varying impacts of COVID-19 on overall workers compensation claims: while COVID-19 claims will have an upward influence on claims, social distancing could put downward pressure on frequency. He also noted telehealth could put downward pressure on the cost of claims.

NCCI files rates and loss costs for every job classification in 38 states, and submits those to regulators for approval in each state. The organization has taken several actions and made several changes to reflect COVID-19.

“We began collecting payroll for furloughed workers so that payroll wouldn’t be used in premium calculations,” said Jeff Eddinger, senior division executive, NCCI. “We are also tracking legislation in each state that affects compensability presumptions.”

Triple-I chief economist Dr. Steven Weisbart pointed out that the last recession was a lengthy one – lasting 19 months – and this one in contrast is unique because it largely depends on a virus and society’s ability to successfully combat it.

Weisbart said he believes the nation will emerge from this pandemic with a different type of economy.

“Telecommuting will be one of the new norms,” he said. “People are recognizing they can do most jobs at home, and companies don’t have the expense of renting office space.”

Weisbart also thinks there will be some additional conversion to robotics and machine jobs, and the number of jobs performed by people may well shrink. He says these types of changes in the workplace will make some difference over time in the types of jobs available and skills required.

Until now, few would have considered a pandemic a likely workers compensation catastrophe. Eddinger noted that traditional methods for calculating the impacts don’t work for low frequency, high severity events.

“NCCI has engaged a modeling firm to evaluate if a pandemic catastrophe provision would be appropriate for future rate filings,” he said. “After 9/11 we applied terrorism models in all 38 of our states, but that was more straightforward because compensability applied to all workers; if you were at work during an event you were covered.”

Watch the highlights: Webcast Highlights Video

Watch the full webcast: Impact of COVID-19 on Workers Compensation Insurance

Additional Resources: 

Media Coverage:

Insurance Industry, Insurers and the Economy

Triple-I: Insurers Poised to Withstand Challenging Economic Times

Leave a comment

The economic uncertainty brought about by COVID-19 has impacted the U.S. insurance industry’s investment portfolios this year yet insurers cumulatively entered 2020 in a strong financial condition, according to a just-released Insurance Information Institute (Triple-I) Economic Snapshot report.

“The good news is the industry is well positioned to provide the safety net we need,” said Dr. Steven Weisbart, Chief Economist and Senior Vice President, Triple-I. “We recognize there’s been deterioration in investment income during the past few months, but the industry was financially strong before the pandemic hit. If a vaccine is discovered, most economists believe the economy will have little trouble bouncing back. Until then, it’s just going to be a longer process than we originally thought.”

The financial fortunes of the U.S.’s property/casualty (P/C) insurers are generally tied to the U.S.’s Gross Domestic Product (GDP) as auto, home, and business (e.g., construction, workers compensation (w/c)) activity are reflective of the economy’s overall health.

Weisbart says while a combination of government restrictions and personal fear is delaying economic recovery, the insurance industry has been able to provide some relief and flexibility for its private-passenger auto insurance policyholders. More than $14 billion in premium relief had been offered to the nation’s drivers in 2020 as of the end of May, a Triple-I analysis found, and insurers continue to monitor the claims experience of motorists.

The Triple-I report shows some additional positive news for insurers. For example, during the past four years the number of owner-occupied homes has risen following a decade during which there was no increase. This is significant for the P/C insurance industry because virtually every owner-occupied home has homeowners insurance while only about half of renters buy renters insurance.

Pandemic-related changes may also affect workers compensation insurance as some states consider changes to the way w/c claims are processed for front-line workers, such as those in health care and law enforcement. On the other hand, some economists suggest w/c claims may experience a decrease due to the number of people working from home.

The Economic Snapshot’s special topic section focuses on life insurance. Although this sector generated its largest pre-tax operating loss of any quarter in at least 18 years, deaths due to the COVID-19 virus weren’t responsible. Instead, the plunge in interest rates was so steep and is expected to last so long that the industry booked an unprecedented increase in aggregate reserves. Reserves rose to $103.5 billion—a $57 billion increase since the third quarter of 2019.

A copy of the 2Q 2020 P/C Industry Economic Snapshot is available to Triple-I members by logging into the members-only portal at www.iii.org.  Please contact members@iii.org for log in instructions, or information about membership.