The Impact of the Coronavirus – Rise of a New Insurance Era? 

 The spread of COVID-19 coronavirus pandemic is taking the world by storm and threatens the individuals and businesses around the world. We are all left wondering about how the world will cope and how this will change the future. The scale of the coronavirus crisis reminds many of us of the 9/11 or the 2008 financial crisis that reshaped many facets of life and the society in lasting ways. 

Before 9/11, few agents would have thought about asking their clients if they would like to pay for terrorism insurance. 

Now, we’re dealing with the coronavirus – a global, novel virus that keeps us contained in our homes, for who knows how long, and is affecting everyone from families to businesses to communities. 

Undoubtedly, this catastrophic event will create environmental and human behavior changes and will as well have an impact on the insurance industry and coverage in many ways. 

The Blindspot 

There’s not much coverage available at the moment for coronavirus-related losses and it will be too late for one to buy a coverage now. The current coronavirus outbreak is going to be likely triggering the World Bank’s pandemic bond. However, if anything was to be paid, it will do so only to a very targeted group of countries – the poorest in the world (so, that excludes the United States). 

The lone area of coverage in the US might be workers’ compensations for first-responders or healthcare workers who get exposed to the COVID-19 while at work. The main hurdle to cross is being able to prove the worker got infected while at work.  

So, you might be wondering now – what about those working at grocery stores? Or banks? How we’ll be able to know where they might have gotten the virus? These are some examples of the blindfold areas. 

Some Coverage Scenarios 

Businesses generally purchase insurance to protect themselves from potential losses. For example, if your client is a restaurant owner and his business is forced to shut down due to a fire or weather event, then he can file a claim for lost income. 

But what about those businesses who have shut down over the coronavirus and the claim boils down from the fear and stigma felt by people associated with the virus? For business interruption to apply, a direct physical damage must occur to your insured property. In this case, there is no physical loss or damage to the property but a potential sudden extreme loss of income that’s putting their business at risk. 

There are a lot of examples as to how businesses or industries are being affected and how insurance responds. For example, what triggers event cancellation insurance? 

Let’s not get ourselves confused. The government restricting large gatherings and the NBA canceling its season because some players acquired the COVID-19 is totally different from one another and hence the coverage is going to be handled differently. 

D&O policies often contain bodily injury exclusions. If a claim is made against board of directors because an employee got the coronavirus from their store, unfortunately, there’s no coverage. 

What if the airline canceled your client’s flight? Will he be still covered by the travel insurance he purchased? If the flight was canceled due to the government imposing travel bans, then you are probably covered. However, if you canceled your fight because you are afraid that you might be exposed to the coronavirus, you would most likely be not reimbursed by travel insurance. 

The Evolving Consumer 

The impact of the current coronavirus on businesses from nearly every sector of the economy has prompted a common question – will insurance cover any losses related to the COVID-19? The answer to this question depends on the specific type of coverage bought and generally, people buy insurance based on their needs and the risks they have – based on probability from what they’ve heard, seen or read. 

Nobody could have predicted the coronavirus and so businesses have never even considered a pandemic policy. But after this coronavirus event, clients are most likely going to look and ask more about insurance coverage endorsements to help them and their businesses prepare and move through in case there’s another pandemic like COVID-19 or similar events in the future. 

Even if the current pandemic didn’t happen and a client inquired about purchasing such insurance coverage, there really isn’t any notable coverage available. 

The Evolving Insurance Industry 

I was surprised to find out that on February 7, 2020, in response to the Covid-19 outbreak in China, the Insurance Services Office (ISO) proposed two optional endorsements for use with the Commercial Property forms to provide limited Business Interruption coverage for business interruption that are due to actions by civil authorities in order avoid or prevent infection or spread by or from the Coronavirus.  

It’s important to note that these endorsements have not been filed and are not being added to the ISO portfolio of forms for now. Likewise, ISO is not providing loss costs or supplementary rating information. In the meantime, ISO is continuing to monitor the situation. Any company filing the forms must follow all filing regulations. 

We are learning a lot from dealing with the COVID-19 and the insurance industry will constantly adapt and transform in response to a future outbreak, be it small or large. It is likely that in the near future, there will be a product for this type of risk if the insurance industry (specifically actuaries and underwriters) can determine the cost to insure the risk. 

As always, our team at DOK Insurance Agency is here to help where we can. For more information or questions about specific insurance policy as it relates to coronavirus, please email info@dokagency.com or give us a call at (425) 242-5252. 

DOMINIK KUNIGK

President
1500 Benson Road South, Suite 201
Renton, WA 98055
Office: 425-242-5252
dom@dokagency.com