This Memorial Day weekend, the unofficial start of summer, many are feeling a renewed sense of hope as COVID-19 infection rates fall and vaccinated individuals are given the green light to travel.
Over 37 million Americans are planning trips of more than 50 miles from their homes this weekend, according to AAA, an increase of more than 60 percent from last year, but still 6 million fewer than 2019’s pre-pandemic travelers on the same weekend.
Drivers are reminded to exercise caution on the roads, as Memorial Day has some of the highest auto accident rates, with alcohol consumption as a major contributing factor.
Triple-I recently spoke with Forbes magazine about avoiding some of the other hazards of summer, including car theft, grill fires, and dog bite liability.
We hope that you take the extra precautions outlined in the Forbes article — as well as review your insurance coverage – and have a safe, healthy summer.
May is Disability Insurance Awareness Month, an occasion to raise awareness about this underutilized financial product, which is designed to safeguard your income in case you get sick or injured and are unable to work.
Disability insurance, also known as disability income insurance, complements health insurance and is meant to replace lost income and help protect you and your family from an otherwise financially catastrophic illness or injury.
Depending on where you have been employed, whether you’ve served in the military, and the reason you’re unable to work, there are a number of potential sources of disability income.
Employer-paid disability insurance is required in most states, and so is the most common. Most employers provide some short-term sick leave. Many larger employers provide short-term disability (STD) and long-term disability (LTD) coverage as well, typically with benefits of up to 60 percent of salary lasting from five years to age 65. In some cases, LTD insurance is extended for life. Disability benefits from employer-paid policies are subject to income tax.
When you buy a private disability income policy, you can expect to replace from 50 percent to 70 percent of income. When you pay the premiums yourself, disability benefits are not taxed.
Social Security disability benefits may be paid to workers whose disability is expected to last at least 12 months and is so severe that no gainful employment can be performed.
The Department of Veterans Affairs will provide some replacement income for veterans, depending on the nature and circumstances of the disability.
Auto insurance may cover some income loss under the personal injury protection (PIP) portion of the policy if the disability results from an auto accident. As always, this depends on the policy, the insurer, and the circumstances.
Disability insurance provides vital protection for most workers against events that are hard to contemplate. Securing this protection in the event of a serious illness or injury is just as important as insuring your home or car.
Click here to learn more about the types of disability coverage available.
Reintroducing wolves into areas where they’ve previously been decimated seems to reduce car crashes involving deer by nearly 25 percent.
Huh? What? Is this one of those “Correlation doesn’t equal causation” memes?
Not at all.
Scientists in Wisconsin have gathered data about road collisions and wolf movements in the state to quantify how the arrival of wolves affected the frequency of deer-auto collisions.
“In a pretty short period of time, once wolves colonize a county, deer vehicle collisions go down about 24 percent,” said Dominic Parker, a natural resources economist at the University of Wisconsin, Madison and co-author of their new study published in the journal Proceedings of the National Academy of Sciences.
You might say, “Well, of course – wolves eat deer, fewer deer means fewer collisions.” But it’s a bit more subtle than that. The scientists found that reintroducing wolves created what scientists call “a landscape of fear.”
“When you have a major predator around, it impacts how the prey behave,” Parker said. “Wolves use linear features of a landscape as travel corridors, like roads, pipelines and stream beds. Deer learn this and can adapt by staying away.”
Just one study
Now, of course, this is just one study, and it’s not being embraced by everyone – for example, farmers and ranchers who don’t love the reintroduction of predators that might kill their livestock or add to the cost of protecting the animals they raise.
“People who value the existence of wolves are often not in the same communities where wolves are present,” said Jennifer Raynor, Parker’s colleague and co-author. “Urban wildlife lovers may be happy to know that wolves exist out there, but rural people have to stare at the carcasses of livestock and pets.”
Deer-vehicle collisions “are happening in both urban and rural areas,” Raynor said. “No one is avoiding this problem” – which means rural people are also benefiting from wolves, whether they realize it or not.
On average, 19,757 Wisconsinites collide with deer every year, leading to about 477 injuries and eight deaths. Wolves save the state $10.9 million in losses every year, the scientists determined —a figure 63 times greater than the total compensation paid for the loss of livestock or pets.
The average cost of an animal-strike claim under comprehensive coverage for 2001-14 models during calendar years 2004-13 was $2,730. That’s a hefty price but still lower than the average payout of $3,510 for a collision claim, the Highway Loss Data Institute has found.
More research needed
Guillaume Chapron at the Swedish University of Agricultural Sciences, who studies large carnivores, says the team hasn’t provided enough information about their statistical methods, the degree of uncertainty in their results, or details on how to replicate their analysis.
“It may be that they found a new dimension to the role played by wolves, but their paper makes a critical evaluation of their findings impossible,” he said. “I’m sure it will be loved by wolf advocates, but much less by statisticians.”
Eyes on natural risk mitigation
More research clearly is needed before anyone should begin advocating large-scale reintroduction of wolves into populous areas with an eye toward reducing auto insurance claims and premiums. But the study highlights an area to which insurers are paying increasing attention: natural risk mitigation.
For example, interest has risen in how restoration of natural ecosystems – such as mangrove forests and coral reefs – can reduce insured losses caused by storm surge caused by hurricanes.
In many places, mangroves are the first line of defense, their aerial roots helping to reduce erosion and dissipate storm surge. A healthy coral reef can reduce up to 97 percent of a wave’s energy before it hits the shore. Reefs — especially those that have been weakened by pollution, disease, overfishing, and ocean acidification — can be damaged by severe storms, reducing the protection they offer for coastal communities.
In Florida, a recent study found, mangroves alone prevented $1.5 billion in direct flood damages and protected over half a million people during Hurricane Irma in 2017, reducing damages by nearly 25 percent. Another study found that mangroves actively prevent more than $65 billion in property damage and protect over 15 million people every year worldwide.
Communities, businesses, and families looking to reduce damages and their associated costs should look closely at natural, pre-emptive mitigation.
A U.S. citizen is reported to have been detained in Dubai for having smoked marijuana.
In Las Vegas.
Where it’s legal.
Peter Clark, 51, had been in Dubai for one day when he fell ill with pancreatitis and was rushed to the hospital, according to the Daily Mail. Nurses took a urine sample that showed traces of the drug. As required by Dubai law, they informed the police of the results.
Clark had last smoked marijuana days before flying from his home in Las Vegas on a business trip in the United Arab Emirates. Since being released from the hospital he has been required to stay in his hotel while awaiting a decision as to whether prosecutors will charge him.
“I was absolutely stunned to learn that I was being charged due to residual marijuana in my system,” he told the Mail. “I smoked it legally back in America long before I even got on the plane. I knew about Dubai’s strict drugs laws but never for one moment did I think something I legally did in my own country would lead to my arrest.”
Not the first time
This isn’t the first time a foreigner has been arrested in Dubai or elsewhere for legal behavior performed before arriving in the country where the same action is illegal. In 2019, U.K. citizen Laleh Shahravresh was arrested for insulting her ex-husband’s new wife in a Facebook comment, according to Detained in Dubai. Shahravresh reportedly had made the posts three years earlier when she was in London, but she and her teenage daughter were detained when they flew to the Dubai to attend a funeral.
Under the UAE’s cyber-crime laws, a person can be jailed or fined for making defamatory statements on social media. Her case eventually was settled with a fine.
It’s impossible to overstate the importance of understanding the laws and culture of countries you intend to visit. In some countries, those swimsuit selfies you posted several years ago might be deemed pornographic. In others, anti-depressants, painkillers, and even over-the-counter cough syrups are banned or have specific rules around them that could cause you problems.
In Singapore, chewing gum is illegal, except for medical use.
Even harder to anticipate, that portable safe you carry your valuables in – cleverly disguised as an iced tea can – might be lined with plaster that could be mistaken by airport security for cocaine when some of it breaks and leaks out into your luggage.
That’s what happened to North Carolina businesswoman Amanda LaRoque on the island of Roatan, Honduras in 2017. LaRoque spent 10 days in a jail cell known as “the cage” – provided only with water and whatever food or other luxuries gracious locals might bring her – before being released.
No insurance coverage, but…
There is no insurance product that will pay your legal bills if you run afoul of the law in a foreign jurisdiction. However, some travel insurers engage “assistance companies” that will refer insurers’ clients to emergency legal service providers.
Richard Atkins, a principal and legal counsel for Philadelphia-based International Recoveries LLC, is one such provider. For more than 30 years, he has operated an international 24/7 legal hotline.
“We do it for the travel insurance industry, to make sure foreign travel is safer from a legal perspective,” Atkins said in an interview. “We also do it for insurers that cover expats and business travelers, as well as for study-abroad programs.”
Atkins typically works through retainers with assistance companies and sometimes directly with insurers or their in-house assistance providers. The service involves an initial consultation with a lawyer with international experience. Sometimes, Atkins said, the matter can be handled and solved just through that call. Other times that consultation also involves a conference or individual call with or selected network lawyer in the foreign county, and many times that solves the legal problem.
“Where the consultations don’t solve the problem, we make a referral to a colleague in the foreign country,” Atkins said. “That initial call is covered, so for all of this, there is no charge to the caller. In other cases, where the individual or family have no funds to expend for a lawyer, we help obtain the services of free counsel – either court appointed or the public defender.”
Navigating legal proceedings in foreign countries is as much a matter of understanding the culture as the law. A simple matter could easily be exacerbated by missteps in etiquette or failure to demonstrate sufficient remorse or deference. Atkins described a case in which a traveler was facing incarceration for having torn up a wad of the local currency – a serious offense in Thailand.
“We were able to show that the defendant had received psychological treatment as a child for behavior that included tearing up his parents’ money,” Atkins said. “When the judge understood the man’s psychological history, he dismissed the case.”
Penny wise, pound foolish
As I’ve written previously, too few international travelers buy travel insurance – and those who do tend to purchase trip cancellation/interruption coverage only, foregoing medical/medical evacuation coverage. A report by the U.S. Travel Insurance Association (USTIA) found that cancellation/interruption coverage accounted for nearly 90 percent of benefits purchased, while medical and medical evacuation benefits accounted for just over 6 percent.
Remember Peter Clark? The headlines about him focus on the cannabis angle, but his troubles began with an unexpected hospitalization. You’re just as likely to become ill or injured abroad as you are at home – maybe more so, due to lack of familiarity with terrain and customs and sensitivity to food and climate. Why would you venture forth without providing yourself with coverage analogous to what you have in your home country?
And while you’re less likely to be arrested than to get sick or injured, the consequences of legal trouble in a foreign country can be extreme. If you’re planning to travel abroad, buy the medical coverage and ask about emergency legal assistance.
Public discussion about re-opening the economy after COVID-19 has mostly revolved around the safety, efficacy, and availability of various vaccines. But in the longer term, other measures and new technologies will be key to getting back to normal and being prepared for future public health emergencies.
Tomer Mann, executive vice president of business development for 22 Miles, discussed his company’s “digital experience platform,” which incorporates temperature-scanning technology, touchless kiosks, virtual concierge, and other applications to provide social distance among customers and employees and early warning of possible infection in business settings.
“In March, when we were seeing a lot of the temperature-scanning solutions coming out of China, we realized we could leverage our software to pivot and create a more secure solution, avoiding some of the sensors that are coming out of China that are blacklisted in the trade market and avoiding some of the data breach implications,” Mann said.
22 Miles’ “workplace workflow” starts at a building’s lobby, using facemask and temperature detection and including badge integration and access control for employees and guests. For companies using shared workspaces, the system tracks what spaces are being used to facilitate sanitization between uses. To minimize physical contact while maximizing interactivity, the system’s components can be activated using voice, gesture, or mobile device.
In addition to facilitating safe, hygienic use of these spaces, the system captures large amounts of data that can provide warnings of possible infections and inform modifications to the workflow.
Scrubbing the air
Santiago Mendoza, senior vice president with Integrated Viral Protection, spoke about his company’s indoor air protection system, which has been shown to capture and destroy coronavirus at a 99-plus percentage rate. The system has shown similar results when tested with anthrax spores and other airborne pathogens.
Heating, ventilation, and air conditioning (HVAC) systems are “super spreaders” of coronavirus and other pathogens, Mendoza said, adding that most filter systems only catch and don’t kill them.
“Our system heats up to almost 400 degrees Fahrenheit and destroys the pathogens,” he said.
The IVP system is available for commercial and residential uses and has been installed in hospitality venues, health facilities, and schools across the United States, Mendoza said. It comes in multiple sizes, including a personal unit for travelers to use in hotel rooms and other closed spaces.
Early warning in water
Jennings Heussner, business development manager for BioBot Analytics, a wastewater epidemiology company, explained how BioBot went from testing for opioids to tracking coronavirus.
“We analyze wastewater coming into treatment plants for human health markers,” Heussner said. The company originally was focused on the opioid epidemic, helping communities better understand the nature of their local opioid problems to better inform their public health response.
When the pandemic hit, BioBot expanded its focus and became the first company in the United States to identify the presence of the virus in wastewater.
Leveraging existing wastewater sampling processes, BioBot analyzes the sample and reports back within one business day after receiving it, providing a quick, inexpensive, comprehensive early warning system.
Ready and resilient
Such technologies will be essential parts of building a pandemic-ready and resilient society. Anticipating and addressing outbreaks early can help alleviate health-related and business-interruption concerns and head off insurance claims.
Just as the insurance industry played a vital role in improving vehicle safety, infrastructure, building codes, and more, insurers and risk managers – partnering with policymakers, businesses, homeowners, and others – will help determine which of these emerging solutions will endure.
Triple-I also offers these tips to help make sure everyone is safe and injury-free this holiday season.
According to the U.S. Consumer Product Safety Commission (CPSC), there are approximately 200 decorating-related injuries each day during the holiday season, with about half involving falls. During the 2018 holiday season, 17,500 people were treated in emergency rooms due to holiday decorating-related injuries, with six deaths associated with holiday season decorations in 2019.
Our Tips: Choose the correct type of ladder for hanging lights, making sure they are indoor lights for indoors or outdoor lights for outdoors; do not nail, tack, or stress wiring when hanging lights; and keep plugs off the ground and removed from puddles and snow.
Christmas trees are involved in about 200 home fires per year, according to the National Fire Protection Association (NFPA). Home Christmas tree fires caused an average of six deaths, 16 injuries*, and $14.8 million in direct property damage annually from 2011 to 2015.
Electrical distribution or lighting equipment was involved in 40 percent of the home Christmas tree structure fires. About 26 percent occurred because some type of heat source was too close to the tree. Decorative lights were involved in 18 percent of these incidents.
Eight percent of home Christmas tree fires were started by candles, which are another major fire hazard. The top three days for home candle fires were Christmas, New Year’s Day and New Year’s Eve, according to the NFPA.
However, cooking fires remain the number one cause of residential fires, an average of 1,700 cooking fires occur on Thanksgiving Day each year. Christmas day and Christmas eve are also peak times for cooking related fires.
Our Tips: Do not leave cooking food unattended and keep children away from the cooking area; keep candles at least 12 inches away from anything that can burn; blow them out when you leave the room or go to bed; be careful if someone in the household is using oxygen; and keep candles away from children.
Although giving toys as presents during this season should be celebrated, there are also risks associated with them. According to a CPSC study from 2019, there were approximately 162,700 toy-related, emergency department-treated injuries and 14 deaths of children under 15 years old, with most related to choking on small parts, like small balls and small toy parts and riding toys.
Our tips: Choose toys in the appropriate age range, with toys with small parts not given to children under three and toys that must be plugged into an electrical outlet not gifted for children under 10; and be aware of toy recalls. Non-motorized scooters in particular are associated with a high rate of accidents, though that has been declining.
We also remind you to keep your home heated to at least 65 degrees, let hot and cold faucets drip to prevent freezing and to keep your fireplace flue closed when it is not being used.
*These do not include firefighter deaths and injuries which are recorded separately by the NFPA.
Work from home arrangements necessitated by the coronavirus pandemic are predicted to become permanent for some employees as companies like Google contemplate ‘hybrid models‘ with more flexible work options.
And though remote work is nothing new, an increase in the numbers of people working from home in the coming post-pandemic years is bound to lead to some thorny workers compensation questions.
In a recent report called “Digital Business Accelerated,” which examines digital transformation trends that small and mid-sized businesses are pursuing, Chubb pointed out that makeshift home offices that don’t properly address ergonomic best practices may lead to an increase in long-term injuries.
Relaxed work habits and environmental inconsistencies in air quality and lighting can also affect the overall wellbeing and performance of employees. And the risk of slips and falls remains in the home, just as it does in the office, said the report.
An injury or illness that occurs while an employee is working at home will be considered work-related if it occurs while the employee is performing work for pay or compensation in the home, and the injury or illness is directly related to the performance of work rather than to the general home environment or setting, according to OSHA.
For example, OSHA goes on to say, if an employee drops a box of work documents and injures his or her foot, the case is considered work-related. If an employee is injured because he or she trips on the family dog while rushing to answer a work phone call, the case is not considered work-related. If an employee working at home is electrocuted because of faulty home wiring, the injury is not considered work-related.
There’s a lot of ambiguity around such claims.
“It is much more difficult to prove that an injury was work-related because there is usually less evidence available in these home office scenarios,” said Gary L. Wickert, an insurance trial lawyer, in a Claims Journal article. “An accident at a business or job site may have witnesses or be caught on security footage. Work at home employees often are all by themselves while they work, so there is often no one present to corroborate a sudden injury or accident or to help determine the precise conditions of the injury.”
Holding a third party responsible (subrogation) for an accident also becomes more complicated in cases of at home injuries.
“When the employee is injured in their home, subrogation targets tend to shrivel up and blow away,” said Wickert. “If an employee is injured at home or while taking kids to the daycare prior to, during, or after the workday… A subrogated carrier cannot sue the employee in the name of the employee – neither can the employee,” he said.
Employers and workers also need to be aware of mental health issues which can develop. Though many tout the mental health benefits of working remotely, others find that remote work leads to anxiety, depression and burnout. The Center for Workplace Mental Health has suggestions for workers that include exercise and keeping a regular schedule, as well as for employers, which includes staying connected and recognizing the impact of isolation.
Anticipation that a COVID-19 vaccine – combined with social distancing, mask wearing, and other protective measures – may soon lead to increased travel revives our need to think about travel insurance.
Even before COVID-19, travel insurance purchases were on the rise, but primarily for trip cancellation coverage – the very product that wound up disappointing many who had their holiday plans disrupted by the virus. Most policies exclude pandemics or fear of travel, which made them practically useless after the outbreak.
Pandemic risk wasn’t on many travelers’ radar screens before the coronavirus struck – any more than the many common illness, injuries, or causes of death that ought to have prompted them to add medical and medical evacuation to their travel coverage. A report by the U.S. Travel Insurance Association (USTIA) last year found Americans spent nearly 41 percent more on travel insurance in 2018 than in 2016. However, trip cancellation/interruption coverage accounted for nearly 90 percent of the benefits purchased. Medical and medical evacuation accounted for just over 6 percent.
People don’t want to think about illness, injury, or death when planning a pleasure trip – still less pay to mitigate an improbable (at the time) threat like a global pandemic.
Travelers who wanted to cover all their bases could have purchased cancel for any reason (CFAR) coverage, which provides some reimbursement (usually 50 to 75 percent) if you cancel, no matter what reason. Before the pandemic, CFAR would have cost 40 to 60 percent more than a standard travel insurance policy. It may be even more expensive now.
Airlines offering COVID-19 coverage
Some airlines have begun offering COVID-19 coverage. This week, Cathay Pacific announced that it is providing free coverage to all passengers.
“Customers who fly with Cathay Pacific from Dec. 7 to Feb. 28, 2021 will be covered for medical expenses related to a COVID-19 diagnosis incurred while overseas,” Insurance Journal reports. “The free cover will be automatically applied when customers book their flights.”
Air Canada recently announced that members of its Aeroplan affinity program making eligible new bookings originating in Canada will receive COVID-19 emergency medical and quarantine insurance. Emirates introduced a similar program in July that it says is free of charge and covers all passengers flying to any destination in any aircraft. The airline recently announced that it has expanded the coverage, adding new features from December 1.
It’s not surprising to see airlines incorporating a COVID-19 “value add” to help boost bookings by an anxious public, and it will be interesting to watch this new business scheme play out. But, lest eager travelers forget, more routine risks that you probably weren’t insuring against before pandemic remain.
Falls, crashes, and drownings
“Globally, an estimated 37 million unintentional falls requiring medical treatment occur each year” write researchers in the journal Injury Epidemiology, citing 2018 World Health Organization (WHO) data. And falls aren’t the most common cause of injury and death on vacation. Research indicates the top two causes of death are automobile accidents and drownings.
Out of the one billion tourists traveling globally each year, it is estimated that 30 to 50 percent are either injured or become ill while traveling abroad.
Don’t let yourself be blindsided by hazards that can be easily avoided or mitigated. Understand the risks your travel plans may entail and insure against them appropriately.
The COVID-19 pandemic has disproportionately affected minority communities across the United States. A less reported but no less significant part of that story has been the disease’s impact on tribal populations.
“Native people make up only around one-tenth of New Mexico’s population but more than 55 percent of its coronavirus cases,” the center wrote back in June, when it said the Navajo infection rate was “greater than that of the worst-hit state, New York; it is even greater than that of Wuhan at the height of the outbreak in China.”
In Wyoming, American Indian/Alaskan Native (AI/AN) people are less than 3 percent of the population but make up more than one-third of the state’s cases, the center said.
Limited health services, insufficient infrastructure, and above-average rates of immunocompromising diseases all predate COVID-19 and contribute to the vulnerability of these populations. Many tribes also feel excessive pain from the pandemic-spurred economic downturn as their lifeblood enterprises in gaming and hospitality are shutttered. Casino closures in early March led to an estimated loss of more than $4.4 billion in economic activity and $997 million in lost wages, affecting 246 tribes with over 500 gaming facilities in 29 states.
The Chickasaw Nation in Oklahoma is among the entities that have filed lawsuits against insurers related to business interruption coverage claims. As hundreds of COVID-19-related lawsuits regarding business interruption coverage make their way through U.S. courts, judge after judge has found in favor of insurer defendants.
Meanwhile, Native American leaders are keeping close watch on the U.S. Supreme Court battle over whether to repeal all or parts of the Affordable Care Act – a move many say could devastate health care for AI/AN communities.
“In the context of what we’re all facing,” said Stacy Bohlen, chief executive officer of the National Indian Health Board, “this is not the time to add this extra burden and an additional crisis onto the Indian health system and onto Indian people.”
The Affordable Care Act, signed by President Obama in 2010, contains provisions specifically relevant to Native Americans, including permanent reauthorization of the Indian Health Care Improvement Act, which provides ongoing funding for Native health programs. It also expanded tribes’ authority to run their own health care programs, including behavioral health and youth suicide prevention programs.
“People talk about the Affordable Care Act like it’s all one thing,” said Sarah Somers, an attorney with the National Health Law Program, who specializes in litigation to help underserved communities access good health care. “But if you repeal it, then all of the codified statutes go away.
A political force
The number of people in the United States identifying as American Indian has climbed in recent years, with California, Arizona and Oklahoma accounting for the largest concentration of the nation’s AI/AN populations, according to a USAFacts analysis of Census Bureau data.
“The U.S. held 2.8 million people who self-identify solely as Native American in 2018, with another 2.9 million identifying as multiple races, including Native American,” according to U.S. News & World Report. “The country’s population that identifies as solely Native American expanded 13% between 2000 and 2018, while the number of individuals who identify as at least partially Native American ballooned 77%.”
In this year’s elections, Native American voters played an important role in some key battleground states, according to High Country News. In Arizona, indigenous people account for nearly 6% of the population — 424,955 people as of 2018 — and eligible voters in the Navajo Nation alone number around 67,000. Native support for Joe Biden — who has released a robust policy plan for tribal nations — may have helped him win that heavily contested state.
That the insurance industry alone can’t be expected to cover future pandemic risk seemed to be a given at yesterday’s hearings by the House Finance Subcommittee on Housing, Community Development, and Insurance.
But, as is so often the case, the devil is in the details.
The session – Insuring Against a Pandemic: Challenges and Solutions for Policyholders and Insurers – was chaired by Rep. William Lacy Clay. In his opening statement, Clay said, “It is not realistic or practical to expect the insurance industry to shoulder the astronomical cost of a global pandemic. The American Property and Casualty Insurance Association has estimated that paying all [COVID-19-related] claims, regardless of exclusions, would amount to $1 trillion per month.”
With respect to business interruption coverage claims currently being adjudicated, Clay referenced both the virus exclusions in most commercial property policies and the lack of “direct physical damage or loss” in COVID-19-related cases.
John Doyle, president and CEO of global insurance broker Marsh, testified on the importance of a public-private partnership to address pandemic risk, as well as to the need to “act now” on a solution for future pandemics.
“Acting now on a public-private pandemic risk solution will accelerate the economic recovery by reducing uncertainty,” Doyle said. “Moving forward, capital markets will seek assurances that companies have protection against prospective pandemic risk. The pace of recovery will depend upon the nature and degree of confidence in the marketplace.”
Doyle said the credit and power of the U.S. government is essential – “at the same time, I believe the insurance industry has a role to play.”
The Pandemic Risk Insurance Act (PRIA), introduced by Rep. Carolyn B. Maloney of New York, provided the jumping-off point for the testimonies and discussions of alternative proposals. PRIA, patterned after the Terrorism Risk Insurance Act (TRIA) put in place after the 9/11 terrorist attacks, was generally recognized as a good start – but several other structures were proposed to address perceived weaknesses.
One is the Business Continuity Protection Program (BCCP), advanced by the National Association of Mutual Insurance Companies (NAMIC), the American Property Casualty Insurance Association (APCIA) and the Independent Insurance Agents & Brokers of America (Big “I”).
Brian Kuhlmann, chief corporate counsel for Shelter Insurance, speaking on behalf of NAMIC and APCIA, described BCCP as a program that “would provide straightforward revenue replacement for businesses and nonprofits of all sizes” using a parametric approach that wouldn’t require claims adjustment. Unlike traditional insurance, which pays for damage if it occurs, parametric insurance automatically pays when specific conditions are met – regardless of damage incurred.
Michelle Melendez McLaughlin, chief underwriting officer for the small commercial and middle market at Chubb, presented a “bifurcated” framework that would treat small businesses differently from mid-size to large corporations.
“Pandemics affect small and large businesses differently,” she said. The Chubb framework would cover small companies for up to three months of payroll and other expenses. Policyholders would be paid a pre-determined amount when the policy is triggered. “This provides policyholders with certainty that they will receive timely financial assistance after an event.”
For businesses with more than 500 employees, the Chubb proposal would create Pan Re – a federal reinsurance facility. “Private insurance companies that choose to sell coverage would write pandemic policies at market terms and retain some portion of the risk. The rest of the risk would be reinsured through Pan Re.”
R.J. Lehmann, senior fellow at the International Center for Law and Economics, agreed with other witnesses that the insurance industry isn’t equipped to handle pandemic risk alone. He went further to question whether insurance is the best structure for addressing this problem.
“Insurance is a system of risk transfer, not a system of economic relief,” Lehmann testified. “Even if private insurers could provide this coverage—on their own or with government support—it is not clear their incentives would align with public health goals or with the aims members of Congress likely have in mind.”
The best argument for a public-private partnership, he said, is that insurers can help policyholders mitigate risks. “But it’s important to ask, ‘Mitigate the risk of what’? The risk you’re trying to reduce is the risk that a business will shut down. But, in a pandemic, you want businesses to shut down. We want them to have a safety net so they can shut down and survive.”
Hartmann counseled legislators to take their time and get the solution right, drawing from all the options that exist.
“Let’s be humble about how little we know, even about the current pandemic,” he said. “Get help to the businesses, workers, and communities who need it now. Don’t legislate for the next pandemic while we’re in the midst of the current one.”