Understanding the impact of COVID-19 on the US insurance industry
At a time when every aspect of life is being transformed to help prevent the spread of COVID-19, compassion and collaboration have never been more essential to the success of families, communities, and businesses. How can we, as an insurance business community, best help one another and help our clients in these unprecedented times?
It starts with understanding the impact of working from home on a business, as well as the business impact of a global pandemic on our industry. Key questions we’ve been exploring include:
- What’s really happening?
- What’s the short-term impact versus longer-term impact to the insurance industry?
- What can we do today to be more prepared in the future?
These topics are top of mind when we meet (virtually) with our insurance customers across the country.
The impact of uncertainty: Multiple perspectives
The following perspectives were assembled after reviewing recent published, publicly available articles and interviews.
Unknown impacts from claims
There will be unknown impacts from claims for Life, P&C, and Health due to the realities of COVID-19. No one can predict how long COVID will persist, the rate of infections and hospitalizations, or how compliant society will be across time with social distancing and other protective guidelines. Individual and community actions will have a dramatic impact on the infection rate.
Potential payment delays
Many companies have closed their physical premises or adjusted operations to meet state distancing requirements and reduce face to face interactions. Naturally, many people are concerned about the personal financial impact of closing businesses. Although governments are looking to ease this burden for their constituents, insurance companies can help their customers by being understanding of potential payment delays. At the same time, companies will need to examine the impact to their cash flows of premium lapses and a shortage of new business revenue.
Reduced mobility for work and travel
Travel restrictions will likely reduce income to insurance companies, namely travel insurance and ‘pay as you go’ coverage. With more people working from home and driving less, some insurance carriers have offered refunds and/or incentives to customers.
Declining global market volatility and low interest rates
While some sectors have recovered or shown improvement since the lowest points during COVID, many still haven’t and some businesses have had to close their doors. The insurance industry is impacted by market-sensitive products that offer guaranteed returns, which are harder to meet with investment instability.
Hopefully, these setbacks are temporary until we see some improvement in infection rates, but the unknown impacts are concerning and difficult to predict. Companies will be looking to “stress test” their financials to be sure that they are making the proper moves to support their customers long term.
Refocus, reinvent, recover
The realities of pandemic living have revealed a new and timely set of concerns for all people to consider. For the insurance industry, one concern is the need to better understand business continuity as it relates to resources and appropriate levels of coverage.
While our industry works to help solve and mediate new problems, one reality rises above all else: the important thing now is for people to stay safe; help their families, neighbors, and customers in need, and focus on winning our struggle with COVID-19.
The National Association of Insurance Commissioners (NAIC) is a great source of industry information. I encourage you to check out NAIC’s Coronavirus Resource Center.
Also, to learn more about solutions for reopening safely, view the on-demand Return to the Workplace digital event. Join us to learn how to use pre-built solutions and low-code tools to speed up return to the workplace readiness.
