Two rights and one wrong: Scoring the industry's response to COVID-19

There's a notable area for improvement that insurers shouldn't ignore

Two rights and one wrong: Scoring the industry's response to COVID-19


By Alicja Grzadkowska

The following is an editorial by Alicja Grzadkowska, senior news editor at Insurance Business. To reach out to Alicja, email her at [email protected].

The past year has revealed many ‘lessons learned’ for the insurance industry, considering the huge changes that the coronavirus pandemic necessitated as it disrupted economies and societies around the world. When scoring the industry and its performance during the pandemic, there are several ways in which companies have performed well when adapting to the new normal, as well as a notable area for improvement that can’t be ignored as the virus remains an ever-present threat.

Adapting the workplace
For most insurance offices, switching over to remote work was a logical step as the coronavirus began its deadly spread in early 2020. There were many standouts among brokers, agents, insurers, and claims management firms as they transitioned to a virtual setting. For instance, Lloyd’s of London recently decided to close its underwriting floor because of the UK lockdown, while Suncorp New Zealand offered assurances in March 2020 that its general insurance businesses, Vero and Asteron Life, would be fully equipped to work remotely during the lockdown.

When it came to Canadian insurers supporting brokers during lockdowns, many showed their willingness to jump on a Zoom call to discuss a submission, offer digital or technical advice for brokers who are less advanced in the digital arena, support broker initiatives, provide risk management tip sheets and regular coronavirus updates, and generally be flexible and accommodating to the pandemic-related challenges that everyone is facing.

On an individual basis, instead of just keeping their careers afloat during this period, insurance professionals have continued to find ways to make advancements, by taking advantage of new networking opportunities and building their skillsets. More broadly, experts agree that while the insurance industry had never conducted such a sudden, wide-scale work from home experiment before, it was reassuring that the general business has successfully maintained core operations while running a largely remote workforce.

Offering risk management resources
Not only have insurers switched their own gears when it comes to remote work during the pandemic, they have also created tons of resources for their clients focused on how to mitigate the risks that have emerged over the past 11 months or so, as companies globally deal with new challenges stemming from COVID-19. Many insurance companies have created coronavirus information ‘hubs’ on their websites to provide tailored information to clients from across industries on a variety of topics, and have taken part in webinars and podcasts that have dived deeper into topics that ranged from Marsh’s “Ten Considerations for Easing Lockdowns and Re-Opening” to AXA XL’s “COVID-19 and the Great Reset: Economic outlook, impacts and opportunities.”

Meanwhile, the now-virtual insurance conferences have stayed on the agenda, bringing crucial information to industry participants on topics beyond the pandemic that have affected individual lines of business uniquely over the past year. This ongoing stream of resources that the insurance industry has been able to provide, despite the crisis, has proven the depth of its expertise.

Finding a solution for future pandemics
Just last week, the final ruling on the appeal of the Financial Conduct Authority (FCA)’s business interruption case in the UK came out – and needless to say, it didn’t go insurers’ way. In its judgment, the Supreme Court chose to substantially allow the FCA’s and the Hiscox Action Group (HAG)’s appeal and dismissed insurers’ appeals.

While markets around the world differ in how policies approach business interruption coverage and, specifically, the wording that details when it would apply, the FCA decision could have ramifications for the broader industry. In response to the news, Mark Pring, an insurance expert at Reed Smith, noted, “We are dealing with a systemic, existential challenge in COVID-19, which has not just wrought significant financial damage to businesses, but has brought into question the fundamental issue of what business interruption policies actually provide cover for. The premiums that businesses pay for business interruption policies can be enormous. Equally, policies can result in insurers paying big sums by way of indemnity. The outcome of this case really matters, and to many.”

As the FCA’s case has played out, the US has meanwhile inched forward slowly on a response to future pandemics. Carolyn Maloney, the Democratic US Representative for New York, has sponsored the bill known as the Pandemic Risk Insurance Act of 2020 (PRIA), which aims to establish a government-administered insurance backstop that would pay for business interruption claims related to a pandemic. Insurers like Chubb, AXA, and Lloyd’s are pushing for action on this front before the lessons of 2020 fade away.

“Pandemic is not a risk you can cover,” Swiss Re AG CEO Christian Mumenthaler said on an earnings call in 2020. In fact, the industry has argued that a large “black swan” event will need government support, since, as noted by Mumenthaler, “Balance sheets of insurers are a tiny fraction” of what might be needed during a calamity.

How to address the business interruption coverage question, as well as answer the looming problem of paying for other catastrophic events, has yet to be addressed, though insurers may want to move faster on this front. Industries globally are struggling to right themselves – notably, the film and TV production sector, and hospitality industry – and will struggle to come back all the way without the security that insurance provides.

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