If the price is right, there is insurance for practically anything. In a recent story from USA Today, it was revealed that Wimbledon had pandemic insurance and will reportedly be paid $141 million due to their event being cancelled due to the virus outbreak. For 17 years they faithfully paid the insurance premium for the small chance their event could be cancelled, the same way many people pay insurance without ever having a claim. This is what insurance is designed for, the rare unforeseen, maybe even once-in-a-lifetime event.
The prevalent idea that you should only buy insurance because someone is making you will live on and live strong. We see it every day with home insurance and banks, car insurance and lenders, business insurance and landlords. But I hope people and businesses will take this opportunity to assess their real risks and make strategic insurance decisions instead of buying the cheapest thing they can find. It's that once-in-a-century event that is the difference in survival or downfall.
Here are some of my thoughts on how insurance will change forever
Insurance companies
In short, everything will change. The changes will not always be obvious or open, but I hope that change finds its way to you, the consumer, in positive ways.
Every insurance policy will be rewritten to account for Coronavirus. Every single one, from the one-day event policy to everyday business policies, to home and auto insurance policies. You may not see it but it will be buried in there somewhere, hidden under the roots and vines of legalese.
It is going to cost a lot to rewrite every policy, most of them are dozens of pages long. To compensate for this cost and to seize the momentum of remote-work capabilities, they will begin reducing overhead, reducing travel, and saving on expenses. Hopefully they will use this flexibility to improve the customer experience, such as improved online access, better payment options, and maybe even reduced premiums!
Some companies will likely take this too far and outsource jobs or lose their personal touch but there will always be those who put the consumer first. Other companies may go bankrupt while fighting virus related claims but new ones will take their place, hopefully ones better suited to handle the complexities of the future.
Auto Insurance
This year a few insurance companies have announced an unprecedented move: giving insurance premiums back to their customers. Progressive announced it will return around $1 billion of premium to its personal auto customers, MetLife and Auto Owners plan to refund 15% of monthly premiums for April and May, and other companies have made similar offerings. Essentially this is an expansion of programs already in place, Insurance companies regularly reward safe drivers by reducing premium and they reward zip codes and even whole states if their collective claims are good. But in this case, everyone everywhere has been a safe driver for the last two months, so way to go everyone!
As a result, it's possible insurance companies will feel more pressure in the future to respond with financial incentives. It is a highly regulated business, limited in what they can actually do, but I hope insurance companies find more opportunities to give back in the future. I suspect rates may even go down in 2021 because of the significantly lower claims data from 2020.
Home Insurance
More people will be permanently working from home from now on and we may see more startups seizing on economic shifts. That means they will have expensive work computers on the desk shared by kids and sippy cups. Home insurance doesn't always account for home based businesses so there will be some adjustments made to both business and personal insurance policies to compensate.
Accounting for the unknown effect of this workspace migration will probably lead to higher rates, at least in the short term. More people spending more time at home means more accidents happen at home, which leads to higher rates. People will probably also be looking for bigger homes, which leads to higher severity claims, which leads to higher rates. See where I'm going with this?
A question insurance companies have struggled to confirm is whether or not Covid related shutdown (such as the governor banning vacation rentals) triggers the Loss of Rents coverage for rental properties. A standard coverage now, Loss of Rents may end up as an optional add-on, meaning more people will go without it.
Life Insurance
Life insurance makes financial sense for both the buyer and seller as long as there isn't a pandemic. If too many people go at once it could bankrupt the system and that doesn’t benefit anybody but the lawyers. Life insurance companies are already asking applicants about Coronavirus and will surely start including questions related to it, require more testing, add language to the policy to better protect themselves, and start charging more to account for it.
Life insurance companies are very data driven, so they will review actual statistics regarding the mortality rate and preexisting conditions. The change in price will tell you a lot about their perspective of the future.
Business Insurance
Employees working from home causes various problems, such as cyber security with users accessing unprotected networks, workers comp injuries with no witnesses, or company owned equipment scattered all over the place.
Business Interruption has gotten a lot of attention but there are other things to consider now that businesses are looking to reopen. What if a customer catches the virus in my store, am I liable? What if an employee catches it and is hospitalized, is that considered workers comp? These fears may keep some businesses from feeling confident about reopening. Business Interruption, General Liability, and Workers Compensation will probably start seeing significant policy wording changes in the coming years. There are already lawsuits opening all across the county to define these issues.
Leases and contracts will probably have new provisions to account for business shut downs. This means new risks for insurance policies such as Lessors Risk, which will also have to be rewritten to adapt. Rewrites mean expenses, which get passed on to policyholders.
Insurance Agents
A lot of insurance agents are giving up on office locations and going completely online. This means they are accessible 24 hours a day and always on the prowl. There is still plenty of merit to having physical locations because the high-value nature of insurance is sometimes better discussed in person. Agencies that keep physical offices will get more high-tech and more competitive.
At Norton Insurance we are committed to moving ahead with optimism and are making improvements every day to help our customers get the insurance they need. The industry will change a lot over the next year but we will be here to help you through it.