With a number of carriers increasing the credit they are giving on their policies, U.S. auto insurers will return over $14 billion to their customers nationwide in response to reduced driving during the pandemic, according to an Insurance Information Institute (Triple-I) estimate.
Auto insurers are giving refunds to their customers as people are driving less due to coronavirus shut-downs. No action is required by customers to receive credit in most cases, but to learn more, contact your auto insurer.
The 2020 Atlantic hurricane season activity is projected to be “well above average,” 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 June 4. They project the 2020 Atlantic hurricane season will have 19 named storms (including the storms that already formed), 9 hurricanes, and 4 major hurricanes.
Probabilities for at least one major (category 3-4-5) hurricane landfall on each of the following coastal areas are:
1) Entire continental U.S. coastline – 70 percent (average for last century is 52 percent)
2) U.S. East Coast, including Peninsula Florida – 46 percent (average for last century is 31 percent)
3) Gulf Coast from the Florida Panhandle westward to Brownsville – 45 percent (average for last century is 30 percent)
The probability for at least one major hurricane tracking into the Caribbean (10-20°n, 88-60°w) is 59 percent (average for last century is 42 percent).
An early forecast had predicted eight hurricanes. A typical year has 12 named storms and six hurricanes — three of them major. Major hurricanes are defined as Category 3, 4, and 5 storms, where wind speeds reach at least 111 miles per hour.
The active 2020 season is partly due to a warmer than normal eastern Atlantic, which is typically associated with more active Atlantic hurricane seasons. Tropical Storms Arthur, Bertha and Cristobal have already formed in the Atlantic as of June 2nd.
“It is important to recognize that these forecasts are not perfect,” said Klotzbach. And even when correct “we can’t say when or where these storms are going to track or if a significant hurricane is going to make landfall.”
“The general public needs to remember that it only takes one storm to make this an active season for you. So now is the time to get the hurricane preparedness kit together so that you will be ready when and if storms threaten,” he concluded.
Take steps to mitigate risks for your home and business – make simple repairs/clean-up of property.
Gather emergency supplies (have a minimum seven days of non-perishable food, one gallon of drinking water per person per day, and medications for all family members).
Take an inventory of your personal property – photos of possessions will make it much easier to file an insurance claim after the storm.
Review your homeowners, auto and business insurance coverage with your insurance professional to ensure you have appropriate coverage in case of loss.
If you don’t already have it, ask your insurance professional about adding flood coverage to your home or business policy. Flood damage is excluded under standard homeowners and renters insurance policies and ninety percent of natural disasters involve flooding. You don’t need to live in a flood zone to incur flood damage from a storm.
Prepare evacuation routes well ahead of time. Make sure you know how to quickly and safely escape your area if emergency management officials issue evacuation orders.
Don’t forget about your pets. When evacuating, many residents leave their pets behind because they have no place to take them. Make sure your local shelters will accept pets and gather information on hotels and motels that allow pets in guest rooms.
Measuring and forecasting inflation is important in setting premiums and anticipating claims. Historically, recessions tend to drive prices down, but that’s not necessarily true for insurance.
This presentation by Triple-I Chief Economist Dr. Steven Weisbart looks at insurance prices and the forces that affect them.
On May 21, Triple-I
CEO Sean Kevelighan testified before the U.S. House of Representatives’ Small Business Committee on the subject of business interruption
coverage.
Since the
outbreak of COVID-19, some legislators and advocates have pushed for policies
that would retroactively force insurers to pay for claims their insurance
policies were not priced to cover. The U.S. House session, “Business Interruption Coverage: Are
Policyholders Being Left Behind?,”
gave members of the committee the opportunity to hear from policyholders and
other interested stakeholders.
“An event like a global pandemic is uninsurable,” said Kevelighan in his statement. “Unlike a typical covered catastrophe, which is limited in terms of geography and time, pandemics have the potential to impact everywhere, all at once…. As such, this type of magnitude requires government resources to step in and provide support.”
Property
business insurance, in general, is meant to cover physical damage from perils
like fire, tornado, or hurricane,” he said. Forcing insurers to cover losses
related to the pandemic – which don’t involve physical damage to property – would
cost the industry between $150 billion to $400 billion per month.
“Make no
mistake; retroactive business interruption payouts would bankrupt insurers,”
said Kevelighan. “A recent Triple-I
economic analysis determined this type of approach would decimate the
industry’s financial resources in a matter of months, and at a time it needs
those monies for major natural disasters that insurance policies cover, such as
tornadoes, hurricanes, and wildfires.”
“Any efforts to retroactively rewrite business
interruption policies are not only unconstitutional (Article I) but would
imperil the insurance industry’s ability to pay covered insurance claims filed
by American homeowners, drivers, and injured workers,” Kevelighan said.
“The current
government shut-down orders do not trigger the vast majority of standard
business interruption policies because those orders do not qualify as direct
physical loss to property—a requirement under the policies,” he said.
“The insurance
industry is stepping up for Americans, with the likes of $10.5 billion in
personal auto insurance premium relief, $220 million in charitable donations,
and even more by keeping nearly two million Americans employed so insurance
customers will be covered, and have their claims handled, when other disasters
strike,” Kevelighan concluded.
View the full testimony and a recording of the webcast here.
The insurance industry is united in its position that pandemics are uninsurable, and the industry has some formidable support in that view. In a letter to the committee, the National Association of Insurance Commissioners (NAIC) said: “The current COVID-19 crisis has highlighted that many existing business interruption (BI) policies have specific exclusions for viruses or other diseases, and coverage is generally only triggered by actual physical damage. Therefore, these policies were generally not designed or priced to provide coverage for claims arising from COVID-19.”
The NAIC letter
said that the group opposes efforts to legislatively apply business
interruption coverage retroactively to claims based on COVID-19 and “has
serious concerns that requiring retroactive coverage of BI claims based on
COVID-19 would pose significant risks to the solvency of insurance companies
and could have systemic impacts on the industry as a whole and potentially the
financial system.”
And in a letter
to President Trump on May 18, six Republican Senators warned that altering
insurance law to cover all pandemic claims under business interruption policies
would devastate the capital reserved for paying other insurance claims.
Most insurance experts believe legislative proposals that would require insurers to cover business-interruption (BI) claims stemming from COVID-19 related shutdowns, even if the insurance policies exclude pandemic-related losses, threaten the solvency of the insurance industry. This is the finding of a survey conducted by the Wisconsin School of Business and the Center for Insurance Policy and Research of the National Association of Insurance Commissioners (NAIC).
The survey also found most experts believe the private
market will have a difficult time efficiently supplying BI coverage for
pandemics, given the systemic, correlated, and non-diversifiable nature of the
peril.
Many survey respondents felt only the federal government can
provide coverage for correlated risks because it can spread the cost through
taxation, long-run borrowing, and deficit financing. But whether provided by
only the federal government or the private market, the pricing and
affordability of coverage were indicated to be issues for both.
Most said they believe the private market can supply BI
coverage for pandemics with an effective federal partnership. Some questioned
whether the Terrorism Risk Insurance Program (TRIP) is a good model for
pandemic insurance, given the similarities between the pandemic and terrorism
perils.
On May 18 the Insurance Information Institute (Triple-I) announced
the launch of the Future of American
Insurance & Reinsurance (FAIR) campaign. FAIR will focus on ensuring the
insurance industry is able to sustain its longstanding role as the country’s
backbone of economic growth and stability.
FAIR is being set into motion as the country seeks a pathway
to economic recovery in the wake of the COVID-19 pandemic. As communities
reopen and restart, insurers will play a critical role in the process,
continuing to provide financial protection for the millions of Americans who
depend on them for indemnification from risks they rightfully insured. Yet the
industry is threatened with growing calls to retroactively alter insurance
policies, cover the economic cost of widespread closures, and adjust workers’
compensation criteria, among other new developments.
Sean Kevelighan
“FAIR was created to safeguard the ability of the
insurance industry to support its customers at a time when policymakers, the
business community, and the general public are searching for solutions to our
ongoing economic turmoil. And while we recognize the need for financial relief
is severe, any attempts to make insurers retroactively responsible for a global
pandemic puts the solvency of many insurers at risk,” said Sean
Kevelighan, CEO, Triple-I.
“While the insurance industry has been doing its part
to step up and support their communities in this time of crisis, pandemics are
fundamentally uninsurable events. The federal government remains the only
entity with the financial resources to help businesses recover from a systemic
event of this magnitude. With the support of the public sector and the
innovation of groups like insurers in the private sector, we can come together
to work toward recovering from this catastrophe and build a more resilient
future,” he added.
Insurance carriers are an integral part of local communities
across the country, employing over 2.7 million Americans and contributing
nearly $565 billion to the nation’s Gross Domestic Product (GDP) in 2018. The
industry has cumulatively offered consumers more than $10 billion in premium
relief on auto insurance this spring and made over $220 million in charitable
donations to COVID-19-related causes.
FAIR will serve as a go-to educational resource for the
media, business community, and broader public in the coming weeks and will
actively engage in a variety of insurance and COVID-19-related developments
across America.
For more information visit fairinsure.org and follow @FAIRInsure on
Twitter.
Triple-I’s “Insurance Careers Corner” series was created to highlight trailblazers in insurance and to spread awareness of the career opportunities within the industry. This month Kris Maccini, director, social media, Triple-I, interviewed Demetrius Gray, Founder & CEO of WeatherCheck.
WeatherCheck, an insurtech that analyzes
weather data to help insurers predict severe weather impact to properties, was
a finalist in 2019’s Resiliency Innovation Challenge.
Demetrius shared insights for building and growing his innovative business, and how he’s advising on severe weather prep amid the pandemic.
Demetrius Gray
Name: Demetrius Gray
Current
Role: Founder
& CEO
Years
at WeatherCheck:
3.5
Tell
us about WeatherCheck? What led you to found this company and build your career
in insurance?
I
was a storm contractor. I chased hailstorms across the continental United
States. Most of my work was around understanding insurance losses, and it gave
me an intimate knowledge, which I used to create WeatherCheck. While there are
numerous weather-related sources, there wasn’t a great place to assess whether
something was damaged or not. For example, would an event at a particular
property rise to the level that the insured should file a claim?
The
insurance industry today is already thinking about creating efficiencies in the
claims process. We allow property owners to sign up on WeatherCheck, type in
any address in the country, and it exposes severe weather loss associated with
that property. We work from the premise that informed people make informed decisions.
At our core, WeatherCheck works to give people quality information so that they
can make the right decision at the right time.
We’re
in the middle of a significant global catastrophe. How has this impacted your
business and conversations around severe weather?
When
the shutdown started happening [throughout the stay at home orders], we had
conversations with emergency managers around the country on what does emergency
management look like for people at home. Normally, they would be at their office
and those structures are built and fortified better than the average
single-family home in the country. What we have seen is an increase in overall
hazard-related deaths this year. The 2020 tornado season has killed more people
than it has in the past few years because people are sheltering in place at
home and risk is greater. We are preparing for these insights now, and we
expect to see even greater risks heading into summer heat waves.
There
is also an infinite question about the current infrastructure. Normally, people
are placed into shelters post event, but that infrastructure has been displaced
largely because the volunteers have been displaced. The inverse of that
conversation is that the risk has been shifted to commercial enterprises and
hotels. If the hotels are closed, then it’s where do we shelter people who have
been displaced? We’re encouraging community partners to have conversations with
stakeholders around planning, including reopening hotels for evacuations
quickly.
Over
the next year, what is top of mind as you grow your business?
Partnerships
are important. We have been working with partners across all sectors to
continue to grow the product itself. How do we help individuals who don’t
necessarily understand their risks or the policies that they’ve purchased to
get what they need? The way we’ll do that well over the next 12-24 months is by
partnering with stakeholders who also have interest in that same asset. Whether
that’s mortgage companies, cities, or banks–that’s where we’ll be focused while
continuing to represent the interests of the insurers.
What
setbacks have you faced in building your business and how did you move past
them?
We’re
the only black-owned meteorology company in the entire country. You get a whole
lot more ‘no’s’ than ‘yes’s’ and those answers are based on unconscious biases.
We had to be very honest with ourselves about what are bias
characteristics–whether it’s race, gender, location–and we had to decide in the
business plan how we were going to overcome those biases. For us, it meant that
maybe venture capital (VC) wasn’t going to be a strong path for us because the
data doesn’t prove out that they would invest in a woman or minority-run
company. We built a profitable business with strategy based on data and that
also influenced what the product looked like.
Through
this process, we decided to go direct to policyholders. The data showed us that
policyholders are largely unbiased and that they want what they want when they
want it. If you have what they want, they will forgo internal biases to make
their buying decisions. By focusing on the data and taking out the emotion, it
allowed us to see viable prospects up front.
What
are your goals for the future in terms of where you want to take your career
and your business?
In
the future, I could see WeatherCheck offering other products and services to
get the insured at a place of homeostasis that is far better than what it is
today. If we look at the number of individuals who are underinsured for flood
or underinsured for fire–the system really sits at the nexus of being able to
drive some of that. We’ll probably see some unique boutique offerings come out
of selling new insurance products geared at solving those challenges. We’ll be
driving better data to continue to inform decisions. We’d like to empower
agents and brokers throughout the country to do an even better job of keeping
the insured better informed. Agents and brokers will play an impactful role in
continuing to drive value. It is very personal when people have a loss from an
event and that personal pipeline is a far better approach than a chatbot or AI.
On May 14 the Insurance Information Institute (Triple-I), co-hosted a
webinar with ResilientH20 Partners that focused on managing
extreme weather events in the midst of the COVID-19 pandemic. The panelists discussed
the changing role of stakeholders across the private sector, governments and
non-profit/NGOs.
The panelists drew from their backgrounds across government, business and insurance to discuss the immediate challenges stemming from the COVID-19 pandemic, the downturn in the economy, and near-term flood and storm threats.
Dr. Michel Léonard,
Vice President & Senior Economist, Triple-I
Richard Seline,
Managing Director, ResilientH20 Partners
Panelists:
Dr. Daniel Kaniewski,
Managing Director, Public Sector Innovation, Marsh & McLennan
Jeff Moseley, CEO,
Texas Association of Business
Katie Sabo, State and
Local Leader, Managing Director, Public Sector Partnership, Aon
Moderator:
Chris Tomlinson,
Business Columnist, Houston Chronicle
Some of the key
takeaways include:
Having
a business continuity plan is a must-have for any business
Flooding
can occur anywhere (not just high-risk zones) – so getting flood
insurance is crucial
In
the midst of the pandemic, we can’t lose sight of the importance of investing
in mitigation and resilience, which will help on a material level post-event
The
COVID-19 crisis is putting unprecedented pressure on local governments – if private
investors have ideas for disaster mitigation, especially ones where return on
investment can be shown – now is the time to bring them, and they will be heard
Insurers
are and will be playing bigger roles in partnering with local governments to
build public/private solutions to disaster resilience
This
webinar is the first in a new series of thought leadership sessions that aims
to be a catalyst for public-private-partnerships focused on enhancing
pre-disaster risk mitigation at each step of the resilience value-chain, from
financing to development, management, technology selection and
crisis-management.
The Atlantic
hurricane season starts on Monday, June 1, but could get an early start this weekend with Tropical Storm Arthur.
The U.S. Treasury Department issued a letter to members of
Congress on May 8 which argued that proposals to force insurers to retroactively
change business interruption (BI) policies to pay losses arising from the
COVID-19 pandemic threaten the ability of the industry to serve policyholders
and might lead to the insolvency of the industry.
In the letter, Principal Deputy Assistant Secretary for Legislative Affairs Frederick Vaughan writes: “While insurers should pay valid claims, we share your concerns that these proposals fundamentally conflict with the contractual nature of insurance obligations and could introduce stability risks to the industry.”
He goes on to say that the Treasury will collaborate with insurer groups, federal lawmakers and states on “addressing losses attributable to the current and potential future pandemics.”
On May 8 the Labor Department reported that the U.S. labor market lost a historic 20.5 million
nonfarm jobs in April, sending the unemployment rate to 14.7 percent. The worst
affected sectors are leisure and hospitality, which lost 7.7 million workers.
Dr. Steven Weisbart,
Triple-I’s chief economist, points out that the employment data for March 2020*
for the insurance industry are startling largely because they are at odds with
employment changes in many other lines of work.
Employment
at property/casualty carriers held steady in March 2020 at 559,100–the same as
in January and only 800 fewer than February.
Employment
at life/annuity carriers held essentially
steady in March 2020 at 347,600–the same as in October 2019 and down a bit
from the 348,000-349,000 in November 2019 through February 2020.
Employment at health and medical insurance carriers rose in
March 2020 to 585,100–its highest-ever level, up 1,500 from February 2020.
Employment at agencies and brokerages rose in March 2020 to
852,400–its highest ever level, up 1,700 from February.
* The insurance industry/sector-specific data are not seasonally adjusted and are one month behind the national data.
