Insurers get an undeserved bad rap
Insurance provides many benefits to society that are sometimes overlooked in the wake of denied claims and lawsuits.
The COVID-19 pandemic is proving to be the most severe financial crisis we have seen in the last decade and possibly the most costly. This is a time for action and education. Now more than ever, insureds need to understand every business risk they face, take a deep dive into their insurance policies and understand that insurance is only one factor of risk management.
Likewise, It is also a time for insurance carriers to identify the risks they are undertaking and ensure insureds are aware of what is covered, what is excluded, and what can be supplemented by an endorsement.
Whether commercial insureds have failed to plan appropriately or are simply naïve about their insurance coverage, many are staying alive with the help of PPP loans and the CARES Act. However, they may still find themselves in bankruptcy, particularly brick and mortar retailers, restaurants and travel-related businesses, which will likely see longer-term effects from the worldwide contagion.
While some companies and events such as Wimbledon were indemnified for their business interruption losses, it is clear that a majority of business owners did not have enough forethought to predict or inquire about pandemic risks when purchasing insurance coverage. Unfortunately, COVID-19 has cast such a negative light on the insurance industry.
Insurance benefits society
Since the Egyptian pyramids were built through to today, the industry has benefited human society. It now is getting a bad rap because of the contractual rights of insurers, which allow them to deny pandemic-related business interruption losses. Following the 2003 SARS outbreak, many insurers added a standard pandemic exclusion to their policies. In addition, to trigger business interruption coverage, there must usually be some aspect of property damage. How this will be applied concerning the coronavirus will most likely be addressed in the courts.
If carriers are forced to pay the majority of business interruption losses, the effects would be devastating and will likely cripple or bankrupt one of the most important industries and a key element to our modern world’s global economic infrastructure, resilience and sustainability.
Underwriters have specialized in making a profit by helping insureds protect their lives, property and livelihoods for centuries. By their nature, they’re designed to take on risk and pay-out when disaster strikes. Legitimately, insurance companies provide reliable insurance products for a fair market price. The profits they earn go toward paying claims, reserves for other losses and investment, which ultimately allows them to grow, offer insurance at better rates, enter new markets and pay dividends to their investors.
Insurers have investors and stakeholders like every other business, and mutual insurance companies, like FM Global, are owned by their policyholders. These highly sophisticated organizations service millions of other customers globally. The industry doesn’t deserve the negative sentiment for just doing its intended job effectively. There are plenty of business interruption claims being paid based on existing policy wording, endorsements or ambiguities therein.
Rebuilding in the face of disaster
Little credit was given to Hank Greenburg and AIG for being one of the first underwriters to step up and affirm coverage following the events of September 11, 2001, considering many policies at the time had terrorism exclusions. Can you imagine where we would be nearly 20 years later if it weren’t for insurance? Financial firms like Cantor Fitzgerald were nearly wiped out of existence!
Underwriters insure risks ranging from common health, auto, homeowner/renter and life insurance policies to more sophisticated lines like cyber, commercial property & casualty, marine, D&O and E&O.
Besides being the backbone and on the frontlines of economic disasters, the industry offers an eclectic array of dynamic, challenging and satisfying work. The risk management and insurance professions offer countless types of jobs. According to Statista, “In 2018, there were approximately 2.69 million people employees in the insurance sector in the United States.”
When one decides to enter the insurance industry, they can choose to be a broker, insurance agent, claims professional, subrogation specialist, actuary, or any number of other specialists who work in and support the industry. Whatever the choice, insurance is a noble profession that plays an important role in the global economy.
Anthony Natole, CPA, is the managing principal of Risk Accountants LLC, and has over a decade of experience in risk accounting and claims investigation. He has examined hundreds of claims for insurance carriers and served as an expert witness. Contact him at anatole@riskaccountants.com. The opinions expressed here are the author’s own.
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