Through this interactive online
session and its accompanying digital resources, GIS is stepping up in support
of insurers’ efforts to conduct internships remotely at a time when physical
workspaces are shuttered to facilitate social distancing.
The companion guidebook to this event, Virtual Internships A Guide for Employers, explains the tremendous value of remote internships and offers tactical guidance on how to rethink and rework internship programs to better suit today’s candidates for tomorrow’s workforce. The accompanying sample internship syllabus gives a practical framework for how to effectively and efficiently organize and administer remote internships.
GIS developed this campaign in response to disruption and
dislocation created by the Covid-19 pandemic. By retaining and enhancing
internship programs while college and corporate campuses are closed,
organizations can get a head start in:
Entering an expanded talent pool that’s
optimized to succeed
Finding candidates that can work independently,
face a wide range of challenges and “think on their feet”
Building increased flexibility into existing
programs to attract highly qualified candidates who otherwise would not be able
to participate
Reducing costs associated with on-site
internships
Positioning their brand and corporate values for
future success in on-campus recruitment
But perhaps most the most important
reason to do this: The 18-25 age cohort already learns, works, socializes and
lives primarily online. Teens and young adults are a workforce prepared for the
challenges of life during and after the COVID-19 crisis. Remote internships not
only help students stay focused on their goals; they offer insurers an
invaluable opportunity to adjust on the fly to the realities of our culture in
the 2020s and beyond.
Today’s students are ready for
this. Organizations like Gamma Iota Sigma are working to ensure that insurance
businesses and our industry are ready for them.
The 2020 Atlantic hurricane season activity is projected to be “above normal,” according to Triple-I non-resident scholar Dr. Phil Klotzbach.
Dr. Klotzbach, an atmospheric scientist at Colorado State
University (CSU), and his team have issued an early forecast of 16 named
storms, eight hurricanes, and four major hurricanes for the year, with above-average
probability for major hurricanes making landfall along the continental United
States coastline and in the Caribbean.
A typical year has 12 named
storms, six hurricanes, and three major hurricanes. Major hurricanes are
defined as Category 3, 4, and 5 storms, where wind speeds reach at least 111
miles per hour.
The forecast is based partly on the fact that El Niño conditions are
unlikely this summer and fall.
“El
Niño
is warmer-than-normal water in the Central and Eastern Tropical Pacific,” Dr.
Klotzbach said. “When it occurs, it tends to increase upper-level westerly
winds that tear apart hurricanes when the try to develop.”
The chart below shows 2020 hurricane probabilities for 18 coastal states.
A lot can change between now and the peak of the season
though, so an updated forecast will be issued on June 4.
As is the case with all hurricane seasons, coastal
residents are reminded that it only takes one hurricane making landfall to make
it an active season for them. They should prepare the same for every season,
regardless of how much activity is predicted.
The Federal
Emergency Management Agency (FEMA) announced
it is extending the grace period to renew flood insurance policies from 30 days
to 120 days to help policyholders who may be experiencing financial
difficulties due to the coronavirus pandemic. The extension applies to National
Flood Insurance Program (NFIP) policies with an expiration date between
February 13 and June 15, 2020.
Said David
Maurstad, the FEMA administrator who oversees the NFIP, “We want to make sure
that policyholders don’t have to worry that their policy will lapse during the
spring flood season or into the start of hurricane season.”
The COVID-19 pandemic is unprecedented in many ways. The human toll is first and foremost on our
minds (as it should be), but as an insurance professional, I’ll stay in my lane
and address one of the economic impacts – business interruption.
Businesses Looking to Mitigate Losses
Among the ways in which we are in uncharted territory is the
scale of how businesses are impacted. Unsurprisingly,
in reaction to slow-downs and shut-downs in many business sectors, businesses
are looking for ways to mitigate their losses or recover lost revenue. One avenue that businesses are exploring is
the availability of business interruption coverage under their property
insurance policies. Other potential
claims include communicable disease coverage found in some policies purchased
by hotels or event cancellation insurance, but those claims are beyond the
scope of this article.
Property insurance was designed originally to cover fire losses
and similar losses of physical property following the Great
London Fire of 1666. Of course,
property policies have evolved since then to cover additional risks including,
in many instances, business interruption losses caused by physical damage to property. A property policy may, for example, pay to
repair the damage caused by a fire and may cover the loss of business during
the reconstruction period. But here’s
the rub. Are the business interruptions related
to COVID-19 caused by physical damage to property?
Policy Language Will Control
The language of an insured’s policy will control whether
COVID-19 interruptions are covered. Unfortunately,
much of the media commentary on business interruption claims related to
COVID-19 has inappropriately treated all insurance policies as though they are identical. Policyholders have a wide array of different
policies they can purchase. For example,
some policyholders have purchased an ISO Businessowners Policy (BOP) with
standard terms and exclusions, others have purchased all-risk policies, and
others have purchased a variation of these types.
This commentary does not try to provide sweeping
pronouncements or give the impression that a single outcome will apply equally
to all situations. Instead, the
following is a starting point for a more detailed analysis under individual
circumstances. Details matter and the
analysis for a particular claim must start with the policy terms and facts
specific to that policyholder.
Is Coverage Triggered?
There have already been a handful of lawsuits filed related
to business interruption claims, some of which suits were filed before the
insurers even denied a claim. For
example, the Oceana suit filed by a restaurant in NOLA
and a suit filed by chef Thomas
Keller, owner of The French Laundry in California. Also, a group of tribal
nations that own casinos filed a lawsuit in Oklahoma and the owner of a
restaurant/movie chain filed suit in Illinois. Policyholders in these lawsuits are seeking a
ruling that they are entitled to coverage for losses sustained during their current
shutdowns. A review of the policies at
issues underscores the point made above – the outcomes in these suits and others
may not all be the same because different policies are at issue.
Nonetheless, there are some overall issues to consider. While the scope of business shutdowns is
unprecedented, we do have similar experiences as a guide, albeit on a smaller
scale, that may indicate how the current COVID-19 business interruption claims
may play out.
The threshold issue will be whether the insureds can prove
that their business losses are caused by “physical damage to property,” which
is the standard language in many business interruption policies. While the concept of causation focuses on
assigning blame for an accident in some legal contexts, it is important to
realize that in the insurance context the issue of causation is different.
In insurance, the concept of causation addresses whether
a particular loss triggers coverage, not who is responsible for causing the
loss. In this regard, we can replace
the word “causation” with “trigger.” So,
the question with the COVID-19 losses becomes, can these policyholders prove
that their business interruption losses were triggered by physical damage to
property akin to the fire loss damage mentioned above?
Past Experience
A series of cases from Minnesota demonstrates how the
COVID-19 business interruption claims might be resolved.
Where there is direct physical loss to property, such as
contaminated oats that could not be sold or a building rendered useless because
of asbestos contamination, the courts have found that business interruption coverage
was triggered. That is, these losses fit
the definition of direct physical loss to property. General Mills, Inc. v. Gold Medal Ins. Co.,
622 N.W. 2d 147 (Minn. Ct. App. 2001); Sentinel Mgmt. Co. v. New Hampshire Ins.
Co., 563 N.W. 2d 296, 300 (Minn. Ct. App. 1997).
But, where an earthquake caused a power loss in two
Taiwanese factories, and as a result, those factories could not supply products
to the Minnesota insured, the court found that the outages caused no injury to
the Taiwanese factories other than a shutdown of manufacturing operations, and
that this did not constitute “direct physical loss or damage.” Pentair, Inc. v. Am. Guar. & Liab. Ins.
Co., 400. F.3d 613 (8th Cir. 2005).
More recently, a federal appellate court considered a claim
related to mad cow disease. Source Food was
a company that sold products containing beef tallow. The USDA prohibited the importation of the
tallow from Canada in 2003 after a cow in Canada tested positive for mad cow
disease. The border was closed to Source Food’s sole supplier of beef product
in Canada. There was no evidence that the beef product specifically destined
for Source Foods was contaminated by mad cow disease, but after the border was
closed to the importation of beef products, Source Food was unable to fill
orders and lost business as a result. Source
Food submitted a business interruption claim.
It argued that the closing of the border caused direct physical loss to
its beef product because the beef product was treated as though it were
physically contaminated by mad cow disease and lost its function. But, the court held that to characterize
Source Food’s inability to transport its truckload of beef product across the
border and sell the beef product in the United States as direct physical loss
to property would render the word “physical” meaningless. Additionally, the
policy’s use of the word “to” in the term “direct physical loss to
property” was significant. The court explained
that the policy did not cover loss “of” property, it covered loss “to”
property. As a result, the cause of Source
Food’s business interruption was the government shutdown of the border, not
direct physical loss to its property. Source
Food Tech., Inc. v. U.S. Fid. & Guar. Co., 465 F.3d 834 (8th Cir. 2006).
What About the Current Claims?
Here, are the business interruptions related to COVID-19 the
direct result of the government restrictions on businesses or are they due to
the physical loss to their property?
Under the reasoning of the Source Food case, much of the current
business interruption claims would seem not to trigger the standard business
interruption coverage in a commercial business interruption policy or BOP. As cautioned above, this is not a universal
outcome under all policies. For example,
an all-risk policy would generally not distinguish between business
interruption losses due to government action or direct physical loss because
all-risk policies cover all losses except those specifically excluded. While it is possible that an all-risk policy
could specifically exclude losses due to civil authority orders, that is not a
standard exclusion in all-risk policies.
With regard to business interruption policy exclusions,
there are exclusions to consider even if a policyholder can meet its burden to
trigger coverage under the standard business interruption policy. For example, some policies have an exclusion
that precludes coverage for losses that result from mold, fungi or bacteria. However, because COVID-19 is a virus, that
exclusion may not apply. But, other
policies have exclusions for viruses, diseases or pandemics. That type of exclusion appears problematic
for policyholders, even those who satisfy the initial question of
causation/trigger.
The result may not be all-or-nothing. Might claims be partially covered? It is possible. For example, if a restaurant were shut down
because it had been contaminated by COVID-19 and needed to be cleaned and closed
for a two-week period to ensure no lingering virus remained, that period of
shutdown might be considered direct loss to property even though the shut-down
period after the cleaning period was not covered because the following shutdown
period was attributable to a government order.
Likewise, there may be a different analysis applied to some business
interruption claims that result from supply chain impacts. However, claims related to supply chain
disruptions are beyond the scope of this article.
Legislation and Duties of Insureds
It is notable that legislators in several states recently
proposed bills that would retroactively void the exclusions that would apply to
COVID-19 business interruption claims. Although
well-intentioned, these bills are deeply troubling because, among other things,
they could severely impact the financial stability of the insurance market,
which took in premiums based on such claims being excluded. And, because the legislation would not help
the 60 percent of businesses that do not purchase business interruption
coverage, the risk of crippling the insurance market is even more questionable.
Moreover, these bills would address only
the exclusions and do nothing to impact the initial question of whether
policyholders can trigger coverage.
Nevertheless, if a policyholder believes it may have a claim under its insurance policy(ies), it should provide prompt notice to its insurer(s) so that it does not risk a denial based on late notice. Likewise, once the claim has been made, it is essential that the insured cooperate with the insurer, including providing timely proof of loss.
Michael Menapace
Michael Menapace is a Triple-I Non-Resident Scholar, a partner at Wiggin and Dana LLP, and a professor of Insurance Law at the Quinnipiac University School of Law.
Triple-I has created an “Insurance Careers Corner” series to highlight trailblazers in insurance and to spread awareness of the career opportunities within the industry.
This
month we interviewed Emily Viner at Guardian Life Insurance, who provided us
with insights about her career trajectory, how she’s working to build a more
inclusive workplace, and her advocacy work helping more women reach management
roles at agencies.
Name: Emily Viner
Current Role: VP of Agency Growth & Development
Years at
Guardian Life Insurance:
22
Tell us about your current role at Guardian Life. What does a typical day look like for you in this role?
As VP of Agency Growth & Development, I make sure that we hire enough of the right people to serve our communities and that our leadership bench is growing. We’re committed to growing future leaders from within the company.
In a typical
day, I act as a bridge between what our field needs–our general agents who own
and operate their businesses as partners of the Guardian network–and the home office. A typical day depends on what’s
going on in the community. In the last three weeks that’s changed dramatically
in what we need to provide to our partners.
As VP of Agency Growth & Development, what is top of mind for you?
Top of mind
for me is making sure that we have the capacity to hire enough of the right
people, and we’re equipped to hire people from diverse backgrounds–creating
workplaces that are inclusive where people feel that they want to be part of
that environment.
One of my
colleagues years ago called it the greenhouse. Is the greenhouse set to make
sure that someone can grow and thrive, and if not, then you’ve got to fix that
first.
You
began your career as a financial advisor before moving on to the corporate side
of the business. What advice would you give to women looking to make a shift in
their careers?
I remember
that first year was so hard. As an advisor, I was in complete control and in a
different environment I didn’t always have that. I would tell all women to say
‘yes’ when you don’t know how. That’s a scary thing, but once you do it, you
realize ‘I made it and I’m fine.’
It’s also
trusting that you’re competent and that you’ll figure it out.
I read an
article years ago that stated women spend a lot of time being competent but not
confident. That’s why saying yes when you don’t know how is so important. If
you’re taking on a project where you only know 20%–if you fall, you’ll learn,
and you’ll move on–that’s how you build confidence.
How
did you get that confidence to follow through knowing that you had that
skillset?
I spoke at
an industry meeting years ago, and during that time, two companies had asked me
to join them. At the time my children were young [three and four], and the
companies weren’t being flexible. One of the companies offered the idea of me
consulting three days a week to help with recruiting and building field
leaders, so I just jumped in to do what was best for my family and my children.
I did that
for two years before joining Guardian Life. In looking back–the two years I
spent consulting–the knowledge that I gained helped me accelerate in the role
once I arrived at Guardian. It’s having faith in your ability and what works
for the current situation and what you’re looking to build. The perspective of
having patience is important. It’s knowing that maybe this is the time that you
need to learn something more or different for that next role.
As
we celebrate Women’s History Month, what are some ways that Guardian Life addresses
topics such as equal pay, leadership opportunities, and inclusion efforts?
We have an
amazing executive leadership team that leads by example [CEO Deanna Mulligan
and President, Andrew McMahon]. They live our values every day through their
actions. We hold ourselves to very high standards, we seek to do the right
thing and people count. That transcends to equal pay, equal opportunities, and all
our inclusion efforts around hiring to ensure that there’s a diverse pool of
candidates for open positions as well as opportunities for internal moves. I’ve
seen inclusion programs really accelerate over the last ten years.
We’re
living in an uncertain time. Your CEO Deanna Mulligan and President Andrew
McMahon have made a public commitment to minimizing business interruptions
during COVID-19 and maintain response during the crisis. How has this type of
leadership impacted your role directly, and how is it impacting the company
overall?
My team
feels proud of the communication. There was a work-from-home strategy starting
March 10th. The safety of our employees is a priority, as is client
communication and services. We were built for this. We got through the 1918
Spanish flu pandemic. We got through the great recession. We payed our
obligations and still paid the dividends. We’re in the same position to be able
to do that today–not just for our employees but for all our clients and
consumers across the country.
Our clients
are in good hands. We updated our website and communications to clients to let
them know they can update their policies and get answers to questions through all
our digital platforms. We’ve also provided our field partners with information
they can share with their clients on market volatility and what they can do to
help calm their fears. With the stock market volatility, the cash value in life
insurance is not going to change, [it’s not subject to the same volatility] so
there is also reassurance with those decisions.
What
are your goals for the future in terms of where you want to take your career?
I’m thinking
about how I’m positioning the firm for the future and building up our bench–
ultimately grooming my successor. I’d also like to continue to help young women
in male dominated industries. I’ve been working towards this for the past 30
years, but there is so much more to do whether it’s in my company or
philanthropic/volunteer. It’s important to me to continue this work.
The Financial Times reports that
U.S. lawmakers and lawyers are considering efforts to force insurance companies
to pay claims related to the coronavirus pandemic. Congress also is debating
the need for legislation to require insurers to cover costs from business
interruption caused by the pandemic. U.S. insurers contend that their business
interruption policies exclude coverage for pandemics and that making such
coverage retroactive would cause the industry to collapse. Joseph Wayland,
general counsel for the U.S. insurer Chubb, said the losses would overwhelm
insurers’ ability to pay and that forcing these companies to take
responsibility for risks they never underwrote nor charged for represented an
existential threat. Bruce Carnegie-Brown, chair of Lloyd’s of London, agreed
that such a revision to insurance contracts would jeopardize the industry.
A Wall Street Journal editorial argues
that forcing costs of the economic disruption caused by the coronavirus
pandemic upon insurers would cause long-term economic damage unless a federal
backstop is put in place. The editorial says if business interruption insurance
“can be stretched and exclusions nullified during a crisis” insurers will conclude
that such coverage is not worth the risk and will drop the product.
Triple-I: Insurers are engaged in COVID-19 crisis
A Triple-I Fact Sheet, Insurers Are Engaged In the COVID-19 Crisis,
outlines how the industry’s financial stability allows insurers to keep the
promises made to policyholders in the event of tornadoes, hurricanes, or
wildfires. It also notes how insurers are contributing to COVID-19 related
charities, such as food banks and medical supplies.
“Pandemics are an extraordinary catastrophe that can impact nearly every economy in the world, so it is hard to predict and manage the risk,” said Sean Kevelighan, Triple-I CEO. “Pandemic-caused losses are excluded from standard business interruptionpolicies because they impact all businesses, all at the same time.”
APCIA on how insurers are helping customers
David A. Sampson,
president and CEO of the American Property Casualty Insurance Association
(APCIA), described in a statement how property/casualty insurers are working “to
proactively help consumers in this time of crisis.”
Examples include
temporary arrangements for:
Flexible payment solutions for families,
individuals, and businesses;
Suspending premium billing for small-business
insureds, such as restaurants and bars;
Waiving premium late fees;
Pausing cancellation of coverage for personal and
commercial lines due to non-payment and policy expiration;
Wage replacement benefits for first responders and
medical personnel who are quarantined;
Suspending personal auto exclusions for restaurant
employees who are transitioning to meal delivery services using their personal
auto policy as coverage;
Adding more online account and claims services for
policyholders;
Shifting more resources to anti-fraud and cyber
security units, in recognition that bad actors prey on victims during times of crisis; and
Suspending in-person loss control visits and
inspections.
On the subject of exclusions
for contagious diseases in business interruption policies, the statement said:
“If policymakers force insurers to pay for
losses that are not covered under existing insurance policies, the stability of
the sector could be impacted, and that could affect the ability of consumers to
address everyday risks that are covered by the property casualty industry.”
It went on to say:
“APCIA’s preliminary estimate is that business
continuity losses just for small businesses with 100 or fewer employees could
fall between $220-383 billion per month. The total surplus for all of the U.S. home,
auto, and business insurers combined to pay all future losses is roughly only
$800 billion, with the combined capital of the top business insurance
underwriters representing only a fraction of that amount.”
Business Insurance reports
that, according to sources inside the federal government, progress is being
made on legislation that would provide a federal backstop for pandemic risk
insurance and that a related bill could be introduced within the next 30 days.
According to the sources, the bill would set up a pandemic risk insurance
program that would be similar to the federal terrorism insurance program. They
also report that Rep. Maxine Waters (D-Calif.), chair of the House Financial
Services Committee, is circulating a draft bill including the proposal.
Loretta Worters, Triple-I’s Vice President of Media Relations, contributed this installment of our Women’s History Month series.
When Linda Goldstein joined CSAA Insurance Group in 2013,
it was very different from the typical male-controlled companies. What drew her
to the insurer was Paula Downey, the first female president and CEO in the
organization’s then 100-year history.
Goldstein, who is the executive vice president of
customer experience and marketing for CSAA Insurance Group, noted that when she
came on board she was impressed with the number of women in leadership
positions.
Linda Goldstein
“It provided a slightly different perspective than a public
company led by mostly men,” she said.
Part of that different perspective was how women were
compensated in the organization. “I’m proud to
say the gender pay gap is not an issue at our organization. I hope more
companies do an extensive pay equity analysis, the same way we did here, so
they can finally close the pay gap,” she said.
Progressive
companies like CSAA Insurance Group engage in pay equity analysis to ensure
equal pay between employees in similar roles. The objective is to determine
that pay inequities are justified by compensable factors, like location and
tenure, and not by unjustified factors, like gender or race and it has been a
success at the firm.
Goldstein acknowledged that women have been
underrepresented in certain areas of the insurance industry. “There are different functions where you tend
to see more men versus women, particularly in leadership roles,” she said,
adding, “the insurance industry needs to do a better job of making sure woman are
aware of the great opportunities across all of the functions. There is a
plethora of jobs out there including innovation, actuary, underwriting, service,
claims and marketing. But the insurance
industry needs to promote those opportunities and support women who seek them
out,” she said.
As people retire, Goldstein hopes more women will be
offered these roles. “Not just from a diversity perspective,” she said, “but
from the ability to bring diversity of thought and focus to the business to
drive profitable and sustainable growth.”
When asked what she liked best about the insurance
industry, Goldstein smiled broadly, “It’s the fact that I know I’m doing
something that helps people. It helps
them either be prepared and protect what’s most important to them or to be able
to recover from a situation,” she said.
“Being in California and having seen the devastation of the wildfires
over the past several years and understanding the stories of our policyholders
who have lost everything,” she paused.
“It really does make a difference.”
Click here
to read the other stories in our Women’s History Month series.
The spread of the coronavirus and COVID-19 – and how governments, businesses, and individuals are dealing with it – raises many issues relevant to property/casualty insurers and their customers.
Triple-I has launched a webpage
to help readers find what they need from the information we gather and curate.
The issues we track range from operational challenges posed by the virus to
likely impacts on claims and losses to the possible introduction of legislative
and regulatory solutions that might affect insurance underwriting and pricing.
We discuss these multi-faceted issues and impacts from our
position as a trusted source of unique, data-driven insights on insurance. The
page will have links to Triple-I reports and presentations on the topic, and
links to many of our blog posts grouped by the following categories:
As quickly as the coronavirus
is spreading, so is the amount of published information available to help
insurers and their customers navigate this confusing environment. But
separating information from misinformation and the truly useful from the merely
“nice to know” can be a challenge.
As a service to our readers,
Triple-I Blog is aggregating and sharing some of these resources. We’re
gathering links and descriptions into blog posts like this one and have
established a page on our website – COVID-19: Issues and Impacts – that categorizes the posts and makes them easier to
find.
As part of its effort to provide information on workers comp legislative
activity, NCCI also monitors workers compensation-related bills in all jurisdictions
and the federal government. You can follow such activity here.
On the non-P/C side, The New York
Times published Coronavirus
May Add Billions to the Nation’s Health Care Bill, which
warns that health insurance premiums could rise as much as 40 percent next year
as employers and insurers confront the additional costs associated with the
pandemic.
One-year projected costs in the national commercial
market range from $34 billion to $251 billion for testing, treatment, and care specifically
related to COVID-19;
Potential COVID-19 costs for 2020 could range from
about 2 percent of premium to over 21 percent if the full first-year costs of the
epidemic had been priced into the premium;
Health insurers are setting rates for 2021. If
they must recoup 2020 costs, price for the same level of costs next year, and protect
their solvency, 2021 premium increases to individuals and employers from
COVID-19 alone could range from 4 percent to more than 40 percent.
Two recently published pieces provide historical comparisons
of COVID-19 with the 1918 global flu pandemic:
National Geographic has published How Some Cities Flattened the Curve During the 1918 Flu Pandemic, which shows how social distancing saved thousands of American lives during the last great pandemic. The piece includes some great data visualizations depicting how the flu played out from city to city.
U.S. insurers are covering employees and employers facing exposure to COVID-19 while easing the financial burdens of their customers and communities during an extraordinary time in the nation’s history, according to the Insurance Information Institute (Triple-I).
“These are challenging times for insurance customers, and the industry is doing all it can to be a financial first responder. Workers compensation insurers are providing coverage to health care workers and first responders in multiple states,” said Triple-I CEO Sean Kevelighan. “Business insurers are protecting financially the restaurants who now offer take-out and delivery services. Beyond that, insurers are extending coverage and payment relief to customers who are struggling financially.”
A Triple-I Fact Sheet, Insurers Are Engaged In the COVID-19 Crisis, outlines how the industry’s financial stability allows insurers to keep the promises made to policyholders in the event of tornadoes, hurricanes, or wildfires. The Fact Sheet also notes how insurers are contributing to COVID-19 related charities, such as food banks and medical supplies.
“Pandemics are an extraordinary catastrophe that can impact nearly every economy in the world, so it is hard to predict and manage the risk,” Kevelighan said. “Pandemic-caused losses are excluded from standard business interruptionpolicies because they impact all businesses, all at the same time.”
Moreover, the exclusion for pandemic-caused losses has been incorporated into standard business interruption policies for years.
A standard business interruption policy typically covers a business when it incurs direct physical damage due to a covered loss, such as a windstorm or a fire. Covered business interruption policy losses—even from a hurricane or a terrorist attack—impact only a portion of the U.S. rather than the entire nation.
Airlines have had to dramatically cut flight schedules due to
the coronavirus pandemic, and some experts believe this has begun to hurt
weather forecasting.
What?!
It turns out that forecasting models depend heavily on data collected by aircraft. The European Centre for Medium-Range Weather Forecasts (ECMWF) said this week that the number of aircraft reports received worldwide declined 42 percent from March 1 to 23. In less than a month, the number of aircraft reports over Europe received and used by the ECMWF fell 65 percent.
Weather forecasting models depend heavily on data collected by aircraft.
A
2017 American
Meteorological Society study found that using aircraft
observations reduced six-hour forecast errors in wind, humidity, and
temperature by 15 percent to 30 percent across the United States.
This is no small matter. The more accurately experts can predict impending weather, the better prepared individuals, communities, and businesses can be. Less accurate forecasts can lead to a lack of preparation and bad weather-related decisions. From an insurance perspective, this can result in larger claims and losses.
So, late last night, worried about yet another negative implication of coronavirus, I fired off an e-mail to Triple-I non-resident scholar Phil Klotzbach. Dr. Klotzbach is a research scientist in the Department of Atmospheric Science at Colorado State University. He has published over two dozen articles in peer-reviewed journals and is quoted regularly by the Weather Channel, Forbes, The New York Times, USA Today, and The Wall Street Journal. He and his team also publish an annual forecast for the Atlantic hurricane season.
True to form – and thanks, in part, to the two-hour
time difference – he responded almost immediately:
“I don't think it's going to be a huge reduction in model skill, but the ECMWF estimates that removal of all aircraft can reduce prediction ability at upper levels in the atmosphere (~30000 feet) by around 10-15% for 12-hour predictions. Subtracting aircraft-provided information from historical model forecasts increased errors by about 3% for surface pressure. The lack of aircraft data has a greater impact on shorter-term forecasts (e.g., <1 day) than it does on longer-term forecasts (e.g., 5-7 days), although some degradation of the forecasts continues even at longer-range timescales.
Of course, some aircraft will still be flying, and some of the loss may be mitigated by other data sources, such as additional launches of weather balloons.”
In other words, the reduction in aircraft data is likely to degrade accuracy of same-day and longer-term forecasts a bit, and some of that degradation will likely be offset by other data resources the forecasting community brings to bear.
Amid everything we need to be concerned about while
dealing with the impacts of COVID-19, the reliability of weather forecasting
isn’t yet at the top of the list.
