COVID-19’s Top Impacts on the Insurance Industry
The pandemic’s impact on the insurance industry is uneven, depending largely on the type of insurance. In certain areas, such as travel, events, and trade credit insurance, losses could be appreciable because the pandemic has cut into new premiums.
In the property and casualty sector, claims have also spiked because companies are dealing with losses from the disruption in normal business operations caused by the pandemic. But there is still a good deal of uncertainty related to coverage of business interruption losses, and many issues related to it need to be clarified.
Companies are also filing more claims for losses connected to director’s and officer’s liability, worker’s compensation, and professional liability.
Auto Insurance
In the early stages of the pandemic, vehicle use plunged when the state mandated lockdowns went into effect. The number of miles driven in April declined about 40 percent from the previous year. Many insurance companies began offering refunds or discounts on premiums. But there was also a concomitant drop in the number of accidents, so insurers’ bottom line remained relatively healthy.
Insurance experts speculate that it will take some time before premiums return to the levels they were at before the pandemic struck. That is because some changes in driving habits are likely to take hold long term. For example, at many companies, employees are working remotely, and this arrangement may become more or less permanent in some places. This may lead to insurance companies reducing their rates and so collecting less in premiums.
Health Insurance
COVID-19 is presenting health insurers with challenges unlike any they have seen before. Prior to the pandemic, the number of people enrolled was fairly stable, enabling companies to maintain the reserves needed and accurately predict how much they would collect in premiums. COVID-19, however, threw these certainties into disarray.
The number of people with health insurance has dropped precipitously because of job losses, which in turn has affected the amount collected in premiums. This situation has made it more difficult for companies to maintain the cash reserves they need to pay out for claims. Moreover, some people and companies are delaying payment of premiums to conserve cash.
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