Putting 2020 in the rearview mirror — Part 1
Riots, wildfires, cyberattacks, hurricanes and the coronavirus were at the forefront of an active year filled with insurance claims.
To say it’s been quite a year seems like a gross understatement. Throughout 2020, hurricanes, wildfires, riots, cyber issues, and the ubiquitous coronavirus challenged insurers. Nothing approached normalcy for any line of insurance. Some of the changes seemed positive like lower auto accident claims, but then they created issues like how much money insurers should return for unfiled claims and led to lawsuits when policyholders thought the refunds were insufficient.
Insurers are the first line of financial defense for every peril imaginable and, as we learned in 2020, even some new ones. In part one of this two-part series, we look at some of the major contributors to this year’s insurance claims.
A virus travels the world
While the coronavirus locked down countries around the globe, its full impact on the insurance industry is yet to be determined. Experts anticipate both short-term and long-term claims that will affect most lines of insurance including workers’ compensation, business interruption, cyber, general liability, travel, health, auto and several specialty lines to name a few. Lloyd’s anticipates $110 billion for coronavirus-related claims in 2020 alone. Allianz Global Corporate and Specialty has reserved $571 million for them and reported an uptick in claims as policyholders questioned how coverage might apply to their different business areas.
The coronavirus closed down schools, businesses, manufacturing and travel, affecting entire industries from hospitality, film, television and sports to banking, legal, finance and retail. Insurers and other businesses transitioned to working virtually almost overnight. “It has accelerated the use of technology to communicate with customers and process claims more efficiently and effectively,” shares Eric Sanders, head of claims for QBE North America. “Initiatives we started years ago involving virtual inspection tools, chatbots powered by artificial intelligence and straight-through processing matured just in time for COVID-19 and the rise of social distancing, travel restrictions and increased working from home.”
Companies also found creative ways to connect in this new reality, such as virtual ice cream socials and wine tastings over WebEx and Zoom. “We found ways to connect internally and externally,” says Lynn Neville, EVP, global head of insurance claims at Sompo International. “From an operational standpoint, transitioning an entire workforce overnight was a herculean effort for most companies. It made you rethink how you do your business from technology investments to efficiencies and streamlining processes.”
As businesses shut down and economies slowed down, companies sought financial relief through their business interruption policies only to find that pandemic-related events were excluded or the policies covered physical damage from events like hurricanes and fires, but not business disruption due to the coronavirus. Cases are now making their way through the courts. “Several important areas are in a wait-and-see mode. The litigation over the applicability of business interruption coverage has been mostly favorable to insurers so far, but we will still have to deal with it for some time,” explains Sanders. “Long-tail lines remain an open issue — for instance, we could see a rise in securities litigation claiming lack of or misleading disclosures by businesses about the impact of COVID-19.”
Sanders also believes that the broadest impact from the coronavirus will be in workers’ compensation due to the occupations where contracting COVID-19 is presumed. “This has mainly included healthcare workers, but [also] other occupations considered essential — e.g., police, transportation and critical retail workers.”
The role of technology has expanded tremendously as claims professionals utilize drones, mobile apps and remote adjusting to keep adjusters and policyholders safe.
“Clearly, one of the most critical issues facing the global insurance industry, for some time now, has been the increasing necessity of digitization. The COVID-19 pandemic hasn’t changed the fundamental realities of the digital landscape, or the execution imperatives for our industry — it’s brought issues to the fore, and accelerated change that was already underway, albeit unevenly,” shares Bill Pieroni, CEO of the Association for Cooperative Operations Research and Development (ACORD), in a written statement to Claims. “The gap between the digital ‘haves’ and ‘have-mores’ was already growing — now it’s widening even further. Digital laggards are finding it increasingly hard to execute, while digital competitors are gaining profitable share.”
The move to remote work throughout the coronavirus has proven a boon for hackers and according to specialist insurer Beazley, middle-market organizations (those with annual revenues over $35 million) have been the hardest hit. Social engineering attacks like email phishing attempts to manipulate someone into revealing confidential information such as login credentials, business email compromise where legitimate-looking emails send someone to an infected site or invite them to download a virus through a link, and emails that spoof credentials and instruct someone to wire payments to a fraudulent account were popular methods.
Attacks jumped from 25% in the first quarter to 55% in the second quarter. Beazley found the most targeted sectors were healthcare, financial institutions, manufacturing, real estate and education.
Part 2 of this series will examine the impact of wildfires, hurricanes and riots on insurance claims.
Patricia L. Harman (pharman@alm.com) is the editor-in-chief of Claims Magazine.
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