The head of one of the U.S. property/casualty insurance industry’s largest trade associations is doubling down on his opposition of attempts by federal and state governments to make business interruption coverage retroactively cover financial losses relating to COVID-19.
Instead, David Sampson, president and CEO of the American Property Casualty Insurers Association, is emphasizing the alternative actions that the industry has taken, or will take, to help alleviate challenges business are facing in light of the coronavirus pandemic. The goal: Enabling the industry to continue taking voluntary steps that help address the crisis.
The alternative – a mandatory requirement for commercial policies to retroactively cover COVID-19 business interruption and other losses – would do more harm than good, Sampson said.
“Many commercial insurance policies, including those that include business interruption coverage, do not include coverage for communicable diseases or viruses such as COVID-19,” Sampson noted in a lengthy statement issued by the APCIA to make its case. “There are some who are calling for actions that would retroactively rewrite existing insurance policies to add new risks to the promises that were made to insurance customers. These types of proposals could have dramatic repercussions for families, individuals, motorists and businesses, potentially compromising the financial ability of insurers to meet their existing promises.”
Sampson cautions that the stability of the insurance sector could be harmed if policymakers mandate that insurers pay for losses not covered under existing policies.
Should the sector’s stability be harmed, “that could affect the ability of consumers to address everyday risks that are covered by the property/casualty insurance industry,” Sampson said.
Citing several data sources (including Bureau of Labor Statistics and ISO), Sampson said that APCIA’s preliminary estimate is that business continuity losses for small businesses with 100 or fewer employees alone could land between $220 billion and $383 billion per month. That presents a stability problem for commercial insurers if asked to absorb those losses, too, Sampson said.
“The total surplus for all of the U.S. home, auto and business insurers combined to pay all future losses is roughly only $800 billion, with the combined capital of the top business insurance underwriters representing only a fraction of that amount,” he said.
Sampson reiterated APCIA’s pledge to work with the Trump administration, Congress, governors, state legislators and state insurance regulators to work on other options. The goal: “to ensure our nation recovers from this crisis and to provide effective relief to those most vulnerable, as well as forward-looking answers that speed economic recovery from future pandemics,” Sampson said.
Crisis Already Being Addressed Voluntarily
As part of Sampson’s pitch to shape the state and national conversation, he notes that many insurers and agents are already taking steps to help policyholders directly.
“Insurers are adopting new technologies and remote solutions to minimize any interruptions in service,” Sampson said. “Meanwhile, even as insurers are protecting the safety of their employees and transitioning to remote workplaces and implementing employee travel bans, our industry is handling claims as we always have.”
He also noted that insurers have taken a number of proactive and voluntary steps during the coronavirus crisis to help both commercial and personal clients. They include:
- Flexible payment solutions for families, individuals and businesses, providing additional time to make payments.
- Suspending premium billing for small business insureds such as restaurants and bars, for a specific number of days or billing cycles.
- Waiving insurance premium late fees for families, individuals and businesses.
- Pausing cancellation of coverage for personal and commercial lines due to non-payment and policy expiration, which includes personal auto, commercial auto, homeowners, business owners, renters, boat, motorcycle, condo, mobile home, personal umbrella and landlord.
- Wage replacement benefits for first responders and medical personnel who are quarantined.
- Suspending personal auto exclusions for restaurant employees who are transitioning to meal delivery services using their personal auto policy as coverage.
- Adding more online account and claims services for policyholders.
- Shifting more resources to anti-fraud and cybersecurity units, in recognition of the bad actors who will prey on victims during times of crisis.
- Suspending in-person loss control visits and inspections, and transitioning to telephone calls and mail surveys.
- Immediate adjustments to policies in-force for significant changes in operations (i.e., reductions in payroll, sales, employee count).
“Insurers are working with Congress and the administration on a national solution for managing pandemic risk to support an efficient and well-functioning economy,” Sampson said. “APCIA supports the federal assistance programs that the administration and Congress are proposing to deliver aid directly to vulnerable business communities, particularly affected small businesses. We also are working with all insurance trades and trades from the broader business community on alternative approaches to address the liquidity needs of American businesses and employees during this time of an unprecedented shutdown of the economy.”
He pointed out that the three million-plus claims due to catastrophes handled by P/C insurers during the 2015 hurricane season (Hurricanes Katrina, Rita, Wilma and others) was the previous record for the industry. Today, he said there is potential for more than 30 million claims from U.S. small businesses.
The discussion about coronavirus business claims, he added, comes even as spring flood season kicks in and insurers prepare for other regular annual threats such as hurricanes and wildfires.