In what ways has insurance been affected by the COVID-19 pandemic?
InsuranceQuotes.com’s newly released 3,500-word State of Coronavirus and Insurance Report answers the questions, explaining how insurers, consumers, and businesses have all been-and are continuing to be-impacted.
“People may debate whether or not this pandemic could have been foreseen, but in most areas of the insurance industry, they saw it coming 18 years ago. That is because, following the SARS epidemic in 2002, nearly every line of insurance coverage began writing in clauses that excluded pandemics and infectious disease causes, protecting many insurers from having to pay out claims in a time like this. That doesn’t mean the insurance industry has been unaffected, though,” says Michael Giusti, insuranceQuotes analyst and author of the report. “From auto insurance companies offering refunds to idled drivers, to business insurers fending off lawsuits challenging their exclusions, to life insurers finding new ways to underwrite their policies, COVID-19 has rocked nearly every part of the insurance world."
The report provides an analysis of COVID-19’s effect on:
- Health insurance
If you already had health coverage through your employer, through a state health insurance marketplace, or through Medicaid or Medicare before the Coronavirus pandemic began, you likely won’t see many changes to your health insurance post pandemic because the rules for treating people afflicted with COVID-19 remain the same as they do for treating any other viral infection. However, changes in health insurance from today’s pandemic come if someone has lost their employer-based health plan because they were laid off or had their hours reduced. In that case, a special enrollment period is opening up for the state-run Affordable Care Act marketplace-based plans.
- Travel insurance
After the Centers for Disease Control and Prevention confirmed the first U.S.-based coronavirus infection earlier this year, many things changed, and all newly written travel insurance coverage became severely limited. That is because trip cancelation insurance is meant to cover unknown or unforeseen events – so, because COVID-19 is now officially foreseen, it would be excluded from nearly every travel policy. However, that doesn’t mean coverage is completely unavailable. Travelers may still be eligible for “cancel for any reason” insurance.
- Unemployment insurance
Congress passed the Coronavirus Aid, Relief and Economic Security Act (CARES), which ushered many changes. Unemployment insurance is a joint state-federal program and is funded through fees paid by employers based on how many employees they have on payroll and how much each of those employees earn. The more someone earns before losing their job through no fault of their own, the more they will be eligible to get in weekly unemployment benefits - up to a state maximum. The CARES Act adds a $600-per-week bonus on top of what someone would otherwise be eligible to earn.
- Business insurance
In the wake of the COVID-19 pandemic, many businesses realized their coverage may not protect them from some of the things they thought it did. The first policy most businesses look to when they can no longer perform their primary function is business interruption insurance. Unfortunately, standard business interruption insurance won’t cover claims based on the COVID-19 pandemic and the ensuing governmental shutdowns because traditional business interruption insurance is meant to be an add-on to a property/casualty policy. For that property/casualty policy to kick in, and by extension the business interruption portion to kick in, typically, a business has to have some sort of physical damage to its premises first. For instance, if a business could somehow prove the pandemic caused physical damage, they may still be out of luck because pandemics are almost always written in as exclusions for business interruption insurance policies.
However, some states and jurisdictions are working with their legislatures and insurance regulators to evaluate whether COVID-19 should be covered under business interruption insurance, despite the policy language that appears to exclude it. Although several states have bills moving through their legislatures to try to compel this change, none yet have been acted into law, and it remains to be seen if those laws would even stand up in court.
- Restaurant insurance
Restaurants have some specific coverages built into their insurance policies, but restaurants have vast stores of food that don’t get better with age. And because spoiled meat and stale beer can’t be sold later, many are arguing that the shutdowns are causing actual damage to their businesses. Through this logic, some restaurants are suing their insurers to force them to cover COVID-19 as a covered event under business interruption insurance, but none of those suits have made their way through the courts yet. In some very rare cases, restaurants might be covered if they have a “contingent business interruption insurance policy” in place. Those are designed to cover a business if they can’t operate because a key supplier is no longer able to provide them with those key things they need in order to do business. Other possibilities include “civil authority coverage” riders and “impossibility of performance or frustration of purpose” riders.
- Special events insurance
Because events have been getting canceled all across the country, many people are hoping their special events insurance is going to step in and cover them. In cases such as the Olympics, it's possible larger events would be covered, presuming they purchased separate event cancelation policies along with a pandemic rider - costly options that many events go without. The Olympics purchased this policy and opted for the extra coverage, but in SXSW and Google’s cases, no such infectious disease rider was purchased, so they got no reimbursement.
Nearly any special events policy written now is going to have specific language written in excluding COVID-19, even if an infectious disease rider is purchased. With that being said, in the cases of weddings, nearly every venue today requires bridal parties to purchase wedding insurance, and many of those policies did cover infectious diseases.
Film and TV productions require unique insurance with coverages ranging from animal mortality, to bodily injury on set, to property loss or damage, even to whether a camera is faulty, or the film can’t be processed. Pandemics, on the other hand, are rarely covered. Nearly every modern production policy has communicable disease exclusions – so on the surface, COVID-19 is going to be excluded and the production companies wouldn’t have any luck recouping costs. And that is unfortunate because COVID-19 has caused nearly the entire film and TV industry to cease operations, putting hundreds of productions on hiatus and leaving thousands of workers without a job.
It is safe to say that social distancing and limited crowd size would be difficult to pull off in nearly any production, making a hiatus the most logical outcome. While the production insurance isn’t likely to pay out for the losses incurred because of stalled filing, moving forward, COVID-19 is almost certainly going to make its presence felt. To start, if they didn’t before, all new production insurance policies will almost certainly have specific exclusions for COVID-19 written in.
- Auto insurance
One of the insurers most directly affected by COVID-19 and the ensuing governmental shutdowns is the auto insurance industry. With fewer people driving, the risk models that auto insurance companies used to set premiums have been tossed out. The policies they wrote months ago assumed drivers were going to spend much more time on the road, and thus would have represented a much greater risk to insure. Now that the morning commute is a recent memory for many, countless otherwise insured miles are now not being driven, meaning that the auto insurance industry may have inadvertently overcharged their customers.
In response, companies are sending refunds – typically 15% to as much as 35% - because drivers are on the road less. Those refunds are being sent as statement credits for people on installment plans, or as checks being mailed or direct deposited to people who paid up front. Many auto insurers are also making donations to community relief efforts and to help community organizations. Many are also working with the customers to offer payment relief and waiving late fees and suspending cancellations because someone can’t make a policy payment.
- Life insurance
The pandemic has changed many things involved in applying for new policies. One place that life insurance is being affected is in the realm of international travel. Whenever someone applies for a new life insurance policy, they are given an extensive questionnaire to help assess their risks. That questionnaire has always asked about plans for international travel, but now those questions carry some added weight. That is because if someone has recently traveled to China, Italy, or any number of coronavirus hotspots, the insurance company is more than likely going to delay the date that the policy goes into place to make sure the applicant doesn’t suddenly come down with COVID-19.
The same goes for the health history questions on the application. The application is almost certainly going to ask if the applicant or someone they live with has recently tested positive for COVID-19. Again, if the answer is yes, it doesn’t mean the policy will be denied, but it might mean it will be delayed for a few weeks until after a full recovery.
Another standard part of the application process is what is called a “paramedical exam.” This is when a nurse comes to the applicant’s house and takes vital signs, such as height, weight, temperature, and blood pressure. In many areas of the country that are still under lockdown, those exams are no longer possible, and insurers have had to improvise a bit. One option people can opt for if they don’t want to bother with the paramedical exam is a “no-exam policy,” but that might not be the right option for everyone, because they cost significantly more than traditionally underwritten policies, and their death benefits often aren’t as generous.
The report also provides a look at relevant key issues for the months and years ahead.
“Post pandemic, many changes and questions will likely emerge moving forward. For one, no insurance policy is likely to offer pandemic or infectious disease coverage any time soon. Another question mark is whether states, regulators, and local jurisdictions will step in and try to force insurers to pay for things that they thought were excluded in their policy language,” added Giusti.
The full State of Coronavirus Insurance Report is available here.