The coronavirus crisis continues to generate data that can be valuable for understanding and decision making. Below are just a few resources that may be of interest to insurers and the people and businesses they serve.
Graphs from the University of Texas COVID-19 Modeling Consortium show reported and projected deaths per day across the United States and for individual states.
The Verisk COVID-19 Projection Tool has been made available to enhanceunderstanding of the potential number of worldwide COVID-19 infections and deaths. It provides an interactive dashboard that leverages the AIR Pandemic Model.
Small and medium-size businesses account for roughly 44% of the U.S. economy and provide employment to about 59 million people. McKinsey is tracking their sentiment to gauge how their views on economic activity, employment, and financial behavior—as well as their expectations about financial institutions and public authorities—change as a result of ongoing public and private interventions.
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.
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.
The Insurance Information Institute invited its members to a webinar titled “Covid-19’s Impact on Health, the Economy and Growth” on March 5 at 11:00 a.m. EST presented by Triple-I Vice President and Senior Economist Michel Léonard, PhD, CBE.
Dr. Lèonard will discuss the following key points:
• Economic impact likely to continue into Q3/Q4 2020 and 2021 • Could reduce global growth by as much as 1 percent and delay recovery by up to 12 months • Fiscal and monetary policy, rates cuts, unlikely to be effective • Insurance industry to see higher claims, reduced premium growth
He will also preview the Global Macro and Industry Outlook report before it is made available to the public.
To find out more about the benefits of Triple-I membership click here.
Supply-chain disruptions due to Covid-19 could affect health care worldwide and lead to health, travel, life, workers comp, business interruption, and other claims.
The Covid-19 coronavirus death toll has passed 1,300 and will likely continue to climb, with more than 60,000 cases reported worldwide. The loss of life and costs of identifying and caring for the sick are compounded by the following considerations:
China, where the virus originated and remains most prevalent, is the world’s largest producer of active pharmaceutical ingredients. In 2018, Politico reports, citing U.S. Commerce Department data, the country accounted for:
95
percent of ibuprofen imports
91
percent of hydrocortisone imports
70
percent of acetaminophen imports
40-45
percent of penicillin imports, and
40
percent of heparin imports.
China also is a major supplier of disposable medical devices like
syringes and gloves, as well as surgical equipment. Michael Alkire, president
of healthcare supply chain consultant Premier, told Modern Healthcare it’s hard to estimate
how many of these goods come from China.
“There are critical pieces of upstream supply chain information
that are unknown, including raw material suppliers, third party and contract
manufacturers, sterilizers and more,” Alkire said. “Because reporting
of this information is completely voluntary, most won’t do so until it becomes
an industry-wide expectation and best practice.”
Any supply-chain disruptions could affect health care worldwide and lead to liability
claims.
“The good news is that most of the people dealing with China tend to
have inventory,” said James Bruno, president of consulting firm Chemical and Pharmaceutical Solutions.
“But if this doesn’t straighten out in the next three months, we could have
some real problems with supply disruption.”
Health-care facilities and other business can become points of infection. Illnesses contracted in such locations can lead to workers comp claims, as well as claims alleging insufficient care was taken to protect customers and vendors from infection. Health workers who contract the virus on the job would likely be eligible for workers comp benefits, though compensability will be determined by the individual situation, policy wording, and laws of the relevant jurisdictions.
U.S. manufacturers rely on China to supply many industrial components and as a market for their own products. If the virus leads to closures of major ports, businesses in the affected countries could cancel contracts with or default on payments to their foreign counterparties. Contract frustration insurance may cover costs associated with such cancellations, depending on circumstances and the terms of their policies
Auto manufacturing could be an early industry to suffer. China shipped
nearly $35 billion of auto parts in 2018, according to United Nations data.
About $20 billion of Chinese parts were exported to the United States alone in
2018, according to the Commerce Department’s International Trade
Administration. Supply disruptions lasting more than a few months could add
momentum to rising auto repair costs.
Event and travel cancellations hurt local and national economies. Concerts and other public events in China have been cancelled over the virus, but its impact on tourism isn’t confined to that country. The contagion emerged right before Lunar New Year – when many Chinese typically travel in China and abroad.
China accounts for more than 10 percent of global tourism, Wolfgang Arlt, founder of the China Outbound Research Institute, said in an interview with National Public Radio. While the most popular destinations for Chinese visitors are in Asia, Arlt said, Paris, Sydney, and New York City also are favorites. That helped make China the biggest international tourism spender in 2018, pumping $277 billion into the travel industry, according to the United Nations World Tourism Organization.
Due to China’s outsized role in global tourism, Covid-19 could affect travel, hospitality, and tourism-dependent businesses around the world. With cruise ships quarantined after the disease was detected, cruise lines may have to deal with longer-term impacts on their businesses, as well as immediate ones related to passenger care and vessel decontamination.
Past outbreaks, such as SARS, Ebola, and Zika, have led many insurers to exclude infectious diseases from coverage in their policies. While specific policies for infectious diseases have been developed, companies reportedly have been slow to purchase them.
