Insurers refunded $1.2 billion to California policyholders as of June 26, according to actuarial firm Perr & Knight.
The California Department of Insurance (CDI) ordered the refunds to drivers and businesses in the state affected by the COVID-19 emergency. The companies were required to file reports outlining the details of their response to COVID-19.
CDI recently made these reports public, and Perr & Knight, which specializes in rate filings, published an analysis. Here are some key takeaways:
California’s reports have information on the number and percentage of policyholders affected. If the state is a guide, EVERY person with a personal auto insurance policy got a break on premiums, as well as millions of other policyholders, according to James Lynch, Triple-I’s chief actuary.
Private auto insurance customers received the largest share of the refunds – a little over $1 billion. Commercial auto customers received about $33 million in refunds, and workers compensation customers received $82.7 million.
Commercial multi-peril clients received $11.2 million, commercial liability $7.2 million and medical malpractice $10.3 million.
The reports also have data on payment deferrals (grace periods), which is something that has been underrecognized, in part because it was so hard to quantify.
business interruption coverage in property policies applies to COVID-19-related
losses has become one of the dominant insurance debates during this pandemic.
Lawsuits have been filed – some even before insurers have denied a claim –
seeking to establish that policyholders are entitled to coverage for losses
sustained during the current shutdowns.
The debate often focuses on a simple phrase in the insurance policy: “direct physical loss or damage.” Business interruption coverage can apply to losses stemming from direct physical loss or damage. Losses that didn’t come from direct physical damages aren’t covered.
“A property policy may, for
example, pay to repair the damage caused by a fire and may cover the loss of
business during the reconstruction period,” writes Michael Menapace, a professor of insurance law at
Quinnipiac University School of Law and a Triple-I
Non-Resident Scholar. “But here’s the rub. Are the business interruptions related to
COVID-19 caused by physical damage to property?”
Insurers say no, arguing that “damage to property” requires
structural alteration like one would find in a typical claim, where, say, a
fire destroyed the interior of a building or wind damaged windows and
The virus, on the other hand, leaves no visible imprint. Left alone, it can’t survive long and, after it has perished, whatever it was attached to is as good as before. Even if some remediation is needed – like cleaning metal surfaces – insurers might argue that this is no different from cleaning dirt off a surface. They cite cases in which judges have ruled there’s no physical damage from mold if the mold can be cleaned off.
Departing from common sense
Others depart from this common-sense, legally recognized
definition. Some plaintiffs’
attorneys argue that if coronavirus
is not direct physical damage then insurers would not have created an exclusion
for viruses in the first place. Many insurers added exclusions for losses from
viruses and communicable diseases after the SARS outbreak in 2003.
language, Menapace says, controls whether COVID-19 interruptions are covered. Some policies
have standard terms and exclusions, some provide “all-risk” coverage –
covering loss arising from any fortuitous cause except those specifically
excluded – and others are variations on these types.
“The threshold issue will be whether the insureds can prove their
business losses are caused by ‘physical damage to property’,” he writes.
past cases, where there is direct physical loss to property – such as
contaminated food that couldn’t be sold or a building rendered useless by asbestos
contamination – courts have found business interruption coverage was
triggered. But when an earthquake caused a power loss in two factories, courts
found the only injury was a shutdown of manufacturing operations that didn’t
constitute “direct physical loss or damage.”
What About Current Claims?
business interruptions related to COVID-19 the result of the government
restrictions, or are they due to the physical loss to their property?
Menapace writes that many of the current claims would seem not to trigger the standard
coverage in a commercial business interruption policy, but he cautions that this
might not always be the case.
true “all-risk policy,” he writes, “generally would not distinguish between
business interruption losses due to government action or direct physical loss
because all-risk policies cover all losses except those specifically excluded.”
most commercial property policies aren’t true “all-risk policies”; instead,
they typically cover business interruption losses “caused by direct physical damage
to property” at or near the insured premises.
will be difficult burden for policyholders to meet,” Menapace says.
policies exclude coverage for losses resulting from mold, fungi, or
bacteria. Because COVID-19 is a virus, that exclusion might not
apply. Other policies exclude viruses, diseases, or pandemics.
a policyholder believes it may have a claim,” Menapace advises, “it should
provide prompt notice to its insurer(s) so it does not risk a denial based on
late notice. Likewise, once the claim has been made, it is essential that
the insured cooperate with the insurer, including providing timely proof of
The insurance industry can meet its obligations to policyholders in the midst of the coronavirus pandemic – but government interventions being discussed threaten to unravel this safety net and could make it impossible for insurers to affordably provide essential coverage in the future.
These are among the conclusions shared by Triple-I chief economist Steven Weisbart and senior economist Michel Léonard in a briefing today that explained how the industry already has been affected by the pandemic and subsequent recession; how policyholder surplus ensures funds are available to cover claims; and how any attempt to retroactively apply this pandemic to business interruption policies would cause irreparable harm to the financial stability of the property-casualty insurance industry.
“Insurers price their policies for expected claims, with additional monies set aside for unexpected claims, such as those which are filed during exceptionally severe hurricane seasons,” Dr. Weisbart said. “The policyholders’ surplus backs up every line of insurance each insurer writes. It is calculated as assets, minus liabilities, and rises and falls due to changes in asset values.”
Dr. Weisbart and Dr. Leonard explained in detail how surplus works and showed how – under a variety of plausible scenarios – retroactively rewriting insurance contracts could make it impossible for insurers to play their critical role as financial first responders.
“If insurers nationwide had to pay business interruption policy claims for which they collected no premium, it could cost the industry each month anywhere from roughly $150 billion to nearly as high as $380 billion,” said Léonard, noting that the smaller amount accounted for the U.S.’s small and medium-size businesses that currently have business interruption coverage and the larger amount includes those who do not. “Pandemic-caused losses are excluded from standard business interruption policies because they impact all businesses, all at the same time.”
As car insurers help their
customers cope with the pandemic’s economic impact through premium refunds and other relief measures and some groups complain the
efforts are insufficient and ask regulators to make insurers pay more, it’s
worth noting that the cost of insuring motor vehicles has grown more slowly than inflation over the
past 12 months and well below prices for hospital services and car repairs –
two key drivers of car insurance claims.
As the chart below shows,
year-over-year increases in auto insurance prices have trailed growth in the Consumer
Price Index, the most widely used measure of inflation.
“Auto premiums are kept relatively low by competition among insurers,” explained Triple-I chief economist Steve Weisbart. “This has been happening even as two major contributors to claims have grown much faster. In the case of hospital services, prices have not just been rising – growth has been accelerating since last July.”
You read that right. Even as two of the biggest contributors to claims – the money insurers pay policyholders after accidents – have grown faster than inflation, the prices policyholders pay for coverage have grown more slowly than consumer prices generally.
Many factors come into play when an insurer determines an
payment – age, driving record, where and how far one generally drives, and
much more; and, let’s face it, no one likes to pay for insurance or to see
their payments go up.
But think about it: even though you might roll the dice if
your state didn’t require you to have insurance, would that really be a wise
move? Would you really want to be on the hook for the full cost of damage to
your car or that of another driver? Or for the liability associated with someone’s
injury or death?
That premium payment provides an awful lot of value in terms
of peace of mind – IF you think about it.
And, if you think further about it, you have more control over how much
you pay for car insurance than you do over other products and services. You can shop around. You can change how much
or what type of coverage you buy. You can bundle auto with other coverages. You
can get fewer tickets and improve how you handle your credit.
Compare this with, say, cable and satellite TV. Your ability
to shop around is quite limited (though improving with each new streaming
opportunity that comes online). The products you really want come bundled with
others you would never pay for if you had a choice.
And the prices of these services, as the chart below shows,
continue to grow at rates well above both CPI and car insurance.
Insurance companies are working to alleviate the impact of
the COVID-19 crisis by supporting their employees and distribution partners,
donating money to global relief efforts and easing the financial burden on
Triple-I has published a fact sheet, Insurers Offer
Forward-Looking Solutions for COVID-19 Recovery, which
outlines how the industry is easing its customers’ financial burdens, working
with government to create a COVID-19 Recovery Fund, and making sure it has the
resources to pay future claims from events such as hurricanes, tornadoes, and
Here are a few examples of what individual companies are
will automatically cover customers who
use their personal vehicles to deliver food, medicine and other goods for a
commercial purpose. Standard personal auto policies typically exclude such
coverage. This change will allow customers to serve those who depend on their
services and support.
Allstate also announced a special
payment plan to provide customers financial relief. The plan gives auto and homeowners
policyholders the choice to delay two consecutive premium payments with no
penalty. In addition, Allstate is pausing policy cancellations due to
nonpayment during the declared COVID-19 state of emergency. This includes
Allstate Business Insurance policies.
Ninety percent of Allstate’s global
workforce is working remotely. Allstate will continue to pay employees (full or
part time) who can’t work remotely and have shelter-in-place orders during
their normal work hours. Well-being services like telemedicine, prescription
home delivery, and emotional and financial support lines are available to
Allstate’s U.S. employees.
Family Insurance along
with the American Family Insurance Dreams Foundation, announced more than $4 million in support for
COVID-19 pandemic relief and other non-profit efforts. Additional support from
the Steve Stricker American Family Insurance Foundation is expected to push the
total support to more than $6.8 million.
has left many struggling to meet basic needs while at the same time adapting to
a new and unsettling normal,” said Maggie Pascaly, American Family community
investment manager. “We want to help meet short-term needs of individuals,
families and communities, while also addressing longer-term effects.”
The company’s employees and agency owners can support local organizations of
their choice by using a 2:1 foundation match offered during a six-week time
period beginning March 31. The foundation will match donations totaling up to
$250,000, for a maximum additional investment of $500,000. Organizations that
provide pandemic relief will be suggested for consideration.
Chubbannounced that it is committing $10 million to
pandemic relief efforts globally. The support will go to people and
programs providing emergency frontline services and for assistance to the most
financially vulnerable members of the community who have been impacted the
hardest by the pandemic.
The company also announced that it will not conduct any layoffs of its employees while in the midst of the COVID-19 pandemic health crisis, and has added employee benefits such as additional sick days.
committed to supporting people, business and communities most impacted by this
global crisis,” said Evan G. Greenberg, chairman and chief executive officer.
“Our $10 million commitment will add to the urgent efforts required to meet the
immediate health and nutrition needs of those most affected. Concerning
our no-layoff pledge, we want our 33,000 employees around the globe to be
assured that their jobs are secure at this difficult time.”
Travelers has initiated a distribution support plan to
accelerate more than $100 million in commission payments to eligible
“As so many are
facing a significant financial burden due to the COVID-19 pandemic, we want to
show our agent and broker partners, many of whom are small business owners, our
support at this challenging time,” said Alan Schnitzer, chairman and chief executive
officer of Travelers. “Independent agents and brokers not only provide
invaluable counsel and care to our customers but also play a critical role in
the U.S. economy, and we are committed to standing by them.”
Bob Rusbuldt, president
and chief executive officer of the Independent Insurance Agents & Brokers
of America, said: “Travelers has always been the premier supporter of
independent agents and brokers, and the Travelers Distribution Support Plan
takes that support to a whole new level. We want to thank Travelers for their
continued industry leadership.”
being accelerated were accrued in the ordinary course of business during the
quarter ended March 31, 2020, and accordingly, this program will not have a
significant impact on the company’s results.
insurance company based in Spain, is allocating 54 million euros to support
customers and suppliers. This is in addition to 5
million euros recently donated to accelerate COVID-19 research in Spain.
More than 90 percent of
MAPFRE’s 34,000 employees worldwide are working remotely to reduce the
risk of contagion and to guarantee service to customers, who in Spain are being
offered a free advisory service to learn how they can take advantage of the
support that is on offer.
us how your company is contributing to the pandemic relief efforts: email@example.com.
U.S. insurers are meeting the challenges faced by their customers, communities, and employees amid the COVID-19 crisis, according to a fact sheet released April 3 by the Insurance Information Institute (Triple-I).
“The nation’s insurers continue to work actively on immediate and forward-looking solutions that will assist its customers and communities in recovering from COVID-19,” said Sean Kevelighan, CEO, Triple-I.
The fact sheet, Insurers Offer Forward-Looking Solutions for COVID-19 Recovery, outlines how the industry is easing its customers’ financial burdens, working with government to create a COVID-19 Recovery Fund, and making sure it has the resources to pay future claims from events such as hurricanes, tornadoes, and wildfires.
Solutions: Insurers are offering payment relief and extending coverage to
customers who are in financial distress while at the same time keeping its employees
on the job to serve these same customers, the Triple-I notes.
Solutions: Trade groups representing insurers have voiced support for the
proposed COVID-19 Business and Employee Continuity and Recovery Fund. It
would be financed by the federal government and provide essential funds to
impacted employers and employees.
Facing Challenges Head-On: Workers
compensation insurers in multiple states are covering the healthcare workers
and first responders who face exposure to COVID-19 while auto, home, and
business insurers are setting aside the resources needed to pay the claims
arising out of future natural disasters even as insurer investment portfolios
have faced their own headwinds. A Triple-I non-resident scholar predicted
yesterday the likelihood of an ‘above-normal’ Atlantic hurricane
While insurance policies might not cover the mitigation or
cleanup costs related to commercial facility exposure to the coronavirus, preserving
a healthy and safe place of business remains a critical risk management issue.
As the coronavirus (COVID-19) continues to spread rapidly around
the world, it’s important to know what to do if someone carrying the highly
contagious virus comes in contact with any of your facilities or those of your
customers. Even the potential of your business premises being exposed to
COVID-19 can create a possible need to engage risk mitigation efforts.
Understanding the importance of utilizing a professional, credentialed
decontamination contractor both before and after facility exposure is crucial
to protecting your business.
“COVID-19 has presented new challenges for businesses around the
world, and it’s necessary to understand the importance of ensuring the safety
of all employees and customers,” said Larry Thomas, global president of
Crawford Specialty Solutions, a division of Crawford & Company that
includes Contractor Connection. Contractor Connection, an industry
leader in managed repair services, provides insurance carriers, brokers and
consumers a global network of more than 6,000 contractors vetted and managed
for performance in residential and commercial work, including specialists in
technical areas like cleanup after a biological event.
“Experts have warned that we have just begun to feel the impact of the
virus in the U.S., and it is expected to continue to affect lives for the
With that in mind, it’s essential you ensure you are
utilizing a decontamination contractor who is rigorously vetted, held to the
highest standards, and professionally equipped to restore affected sites
through proper remediation and containment procedures. Here are some best
practices for how to approach this critical work while reducing risk for you
and your customers.
Prevention protects you, your customers and others
Prevention is the first step toward reducing exposure to the
virus. Even before an incident occurs, a decontamination contractor can work
with your business to provide cleaning and disinfecting services designed to
reduce the opportunity for infection and keep facilities operating longer. When
administered by a trusted, licensed and insured provider, preventative cleaning
provides a cleaner, safer work environment and enhances employee and customer
Decontamination services limit business interruption
If you or your customers’ facilities are exposed to
coronavirus, legitimate decontamination services using proper techniques,
equipment and materials, and following CDC, state and local protocols should be
employed to restore your places of business back to operation as quickly as
possible, limiting business interruption. Time is critical, so you should
engage with a service that provides 24/7 assignment processing and emergency
“Providing access to a rapid-response decontamination
service can help reduce the potential impact of contamination in the workplace
and return the environment to full operational status as quickly as possible,”
said Lance Malcolm, U.S. president of Contractor Connection. “The focus must be
on helping companies limit business interruptions and ensure that the affected
facilities are completely safe for those who use them.”
Safe biohazard waste disposal reduces future risk of
As part of decontamination services, it’s also important to
utilize contractors trained to handle and properly dispose of biohazard waste,
safely removing any affected materials from the facility. Services that provide
quality assurance review and project monitoring ensure speedy completion and
provide peace of mind knowing exposure to the virus has been properly reduced
U.S. insurers are covering employees and employers facing exposure to COVID-19 while easing the financial burdens of their customers and communities during an extraordinary time in the nation’s history, according to the Insurance Information Institute (Triple-I).
“These are challenging times for insurance customers, and the industry is doing all it can to be a financial first responder. Workers compensation insurers are providing coverage to health care workers and first responders in multiple states,” said Triple-I CEO Sean Kevelighan. “Business insurers are protecting financially the restaurants who now offer take-out and delivery services. Beyond that, insurers are extending coverage and payment relief to customers who are struggling financially.”
“Pandemics are an extraordinary catastrophe that can impact nearly every economy in the world, so it is hard to predict and manage the risk,” Kevelighan said. “Pandemic-caused losses are excluded from standard business interruptionpolicies because they impact all businesses, all at the same time.”
Moreover, the exclusion for pandemic-caused losses has been incorporated into standard business interruption policies for years.
A standard business interruption policy typically covers a business when it incurs direct physical damage due to a covered loss, such as a windstorm or a fire. Covered business interruption policy losses—even from a hurricane or a terrorist attack—impact only a portion of the U.S. rather than the entire nation.
Louisiana reportedly has the third-highest case load of coronavirus in the United States on a per capita basis – after New York and Washington – and the fastest growth, according to a University of Louisiana at Lafayette analysis of global data.
Some health experts say it’s no surprise New Orleans would be hard hit after over a million people flocked to the city to celebrate Carnival for more than a month, culminating in Mardi Gras at the end of February.
“It is still impossible to know exactly how long the COVID-19 pandemic will impact Louisiana,” the governor said, “but what we do know is that we have more cases per capita than every state, except for New York and Washington.” On Sunday, he issued a stay-at-home order to slow the rapid rise.
While some parishes appear to be unaffected, Edwards said testing just hadn’t caught up. “We shouldn’t delude ourselves. It’s in every single parish,” he said.
In Florida, Gov. Ron DeSantis said New York’s order for people to stay home to curb the spread of the new coronavirus led some people to leave — and come to Florida. At a news conference, the governor said he’d spoken with President Trump about doing something about airline flights ferrying New Yorkers to Florida.
COVID-19 diagnoses continue to be made in Washington state every day, the Seattle Times reported — an indication of both the virus’ spread and of expanded testing capacity. The state Department of Health announced 248 newly confirmed cases Tuesday, bringing the state total to 2,469 cases, including 123 deaths. The bulk of Washington’s cases remain in King County, which has seen 1,277 people fall ill and 94 die.
Possibility of “ventilator triage”
Faced with more critically ill COVID-19 patients than equipment to treat them, hundreds of hospitals are mapping out how they can ration care and equipment in order to save the greatest number of patients possible.
Guidelines were provided this week to scores of hospitals around the country that include a point system that could – in extreme cases – end up determining what patients live or die.
“Priority is assigned to those most likely to be saved, and most likely to live longer,” said Dr. Scott Halpern, professor of medical ethics and health policy at the University of Pennsylvania.
The Wall Street Journal Updated March 26, 2020 10:15 am ET
Potential employer liabilities
Decisions made in the fluid pandemic crisis could lead to liability issues in the future. Marsh & McLennan has advised employers that even well-intended actions can lead to liability claims. In particular, it advises them to keep in mind:
Employees who refuse to work due to a belief that their health could be in immediate danger could be considered to be engaged in protected activity under the Occupational Safety and Health Act. Employers should avoid subjecting those employees to adverse action.
A group of employees who refuse to work because of concerns about the virus could also be considered protected under the National Labor Relations Act. Disciplinary action or termination of these employees could thus lead to an unfair labor practice claim.
There are no federal requirements that nonexempt (hourly) employees be paid for time not working — for example, while under an employer-mandated quarantine — nor is there a federal paid leave of absence law. But employers must be cognizant of the myriad state and local laws that bear on these issues.
Health insurer costs and profit pressure
Managed care companies in the U.S. are likely to see elevated cost trends and more significant pressure on their profits the longer the COVID-19 pandemic continues, according to S&P Global Ratings.
S&P said in a report that the impact will depend on how far and how quickly the coronavirus spreads, as well as how many hospitalizations it causes.
“If the outbreak is mild both in terms of the infection rate as well as morbidity, the impact will be limited,” the report reads. “However, an increased spread of the virus and higher morbidity from COVID-19 could result in higher-than-expected cost trends for insurers. The claims trend will be especially affected if more patients are treated in inpatient facilities compared to lower-cost outpatient settings.”
Robots, drones, and other technologies are being
deployed in the fight against COVID-19, introducing new opportunities,
challenges, and risks.
From “tele-health” solutions that facilitate care from a distance to robots
that disinfect facilities to drones that
help manage crowds, the pandemic is spurring novel uses of existing
technologies and could lead to new ones as nations, companies, and communities
try to be better prepared for the next outbreak.
Use of video conferencing and other forms of remote health-care delivery
was developed to serve communities with few medical facilities. Today’s extreme
circumstances, however, highlight its broader value.
week said it will expand coverage for telemedicine nationwide to help
seniors with health problems stay home and avoid coronavirus exposure. The
virus threatens to overwhelm the U.S. health system in coming weeks, creating a
need for remote services.
“Oregon just rejected us because we didn’t have a facility there, and
they told us to get one before we reapplied,” said James Wantuck, chief medical
officer at San Francisco-based telemedicine firm PlushCare. “North Carolina, we
found out, is really targeting retired doctors who previously had a license in
that state, while other states like Mississippi, Colorado and Florida are
making it very easy for our doctors to get licensed there.”
Over the past week, increased demand has slammed
facilities that are used to serving only a few patients a day and now face
“You can get the technology to support these astounding volumes,” said
Roy Schoenberg, CEO of Boston-based telemedicine company Amwell. “But you’re
very quickly getting to a point where the supply of medical services isn’t
there. We need to have enough clinicians to allow us to handle that incoming
At the Wuchang field hospital in Wuhan, China – epicenter of the first coronavirus outbreak – a ward was staffed with 5G-enabled robots to help contain the contagion and alleviate the strain on human personnel.
Doctors in the United States used
robot-assisted telemedicine to treat the first person in the country
admitted to hospital with 2019-nCoV. In a two-bed isolated area at Providence
Regional Medical Center in Washington – set up five years ago to deal with
Ebola but never used – a robot equipped with a camera, microphone, and
stethoscope enabled the patient consult with clinicians without direct contact.
Robots also are being used
for disinfection. Xenex robots –
manufactured in San Antonio, Texas – use pulsed xenon ultraviolet-C (UVC) light
to destroy pathogens. The company says its devices are being used to clean
hospital rooms where there have been suspected cases of the new coronavirus.
The robot can clean a room in as little as five minutes.
Los Angeles-based Dimer UVC Innovations has developed a germ-killing
robot to sanitize airplanes. The robot – called GermFalcon – is being used at
the Los Angeles International Airport, San Francisco International Airport, and
John F. Kennedy International Airport.
In Spain, police are using drones to warn people to stay at home. Spain has declared a state of emergency and ordered citizens to stay indoors, apart from necessary trips, after reporting a sharp rise in coronavirus cases. BBC footage shows deserted Madrid streets policed by drones. The drones are controlled by humans who relay warnings through them via radio.
China drones were deployed to observe crowds and help manage traffic.
People not wearing masks in public could be identified, and the drones were
able to broadcast information to larger areas than regular loudspeakers. They
also used thermal imaging to identify people with elevated body temperatures
and were used to spray disinfectant in public areas.
Expanded use of these technologies against COVID-19 is a logical
continuation of their evolution, but such advances don’t occur in a vacuum. Concerns
about machines replacing human workers – especially if this outbreak ushers in
a new era of “social distancing” – and about normalizing surveillance and use
of drones for crowd control almost certainly will be raised.
If telemedicine gains greater traction, will cost efficiency conflict
with efficacy of care?
Will internet-enabled technologies create more channels for cybercriminals to exploit?
Will greater social acceptance of technological solutions result in
decreased attention to low-cost approaches to containment, like hand washing
and environmental cleanliness?
Policymakers, corporate decision makers, and communities will need to address these and many other questions after this virus has been suppressed.