Many insurers have made grand, public gestures, returning some $10 billion of premiums to customers whose lives and businesses have been put on hold by the coronavirus, but I'm not sure customers have really noticed. I worry that the insurance industry is losing the messaging battle at a crucial time. We risk being relegated to the traditional role of the bad guy, hiding behind lawyers to deny any and all claims, at a time when we need to be helping customers as much as possible--and need to be seen doing that good work.
Already, some politicians are trying to turn coronavirus into a sort of asbestos, making the insurance industry cover risks that it never signed up for. Yes, with SARS serving as a warning in the early 2000s, the insurance industry wrote policies in recent years that excluded pandemics, in a way that the industry never explicitly excluded asbestos, but public opinion is a funny thing: Groundswells can develop if they aren't headed off at the beginning. And politicians respond to groundswells. After all, it's people who vote, not corporations.
To try to figure out whether the industry had already lost the battle for public opinion, and what more the industry could be doing, I called an old colleague who has been doing PR for major insurance clients for decades. (We'll just call him Sam, because he wants his clients, not him, to be the story.) The good news is that he said the battle isn't lost yet. The bad news is that Sam thinks the industry needs to do a lot more to get the message out that it's living up to its responsibilities while helping clients however possible.
"A lot of people hate the insurance industry," Sam said. "Here's how they see us: Clients pay us a bunch of money, then they have an issue, file a claim, and the insurance company hires a lawyer to fight them--over a product they bought but never received."
He said it's crucial to keep hammering away at the message that insurance companies are in the business of paying claims. They wouldn't have any customers if they didn't pay claims.
"That message gets tricky, of course," Sam said, "because the customer hears, You pay lots of claims, just not mine...?"
Some industry leaders--including Evan Greenberg, CEO of Chubb, and John Neal, CEO of Lloyd's--have seemed to make headway with repeated assertions that the industry can't be saddled with risks it wasn't paid to take on and, in particular, that it simply isn't practical or fair to expect insurers to cover what amounts to the cost of a war.
Hitting those themes, a Washington Post columnist wrote, "While the businesses that are currently shuttered didn’t do anything wrong, neither did their insurers.... Since everyone is getting the benefit [from the shutdown], everyone should pay for it: through borrowing now and taxes later. Think of it as Americans belonging to one of the largest mutual insurers in the world: the United States of America, Ltd."
Sam said the industry doesn't do itself any favors with legislators or customers by referring to its capital as surplus or reserves. "Reserves? Surplus? Come and get it!" he said.
But he said the argument against raiding reserves is pretty straightforward: Claims for business interruption would be some $300 billion a month, for an industry with $800 billion in reserves--and, oh, by the way, that money isn't just sitting there; it's set aside to pay other claims that insurers already face. The industry wouldn't last long in the face of such claims.
Neal has said that just paying legitimate claims will already make COVID-19 the most expensive event in the history of insurance.
The fact that Marsh offered a pandemic policy two years ago and got no takers seems to resonate in conversations I have with folks outside the industry: It hardly seems fair to make insurers pay on policies that customers declined to buy.
But Sam said insurers need to get beyond the defensive. "Nobody reads the fine print until something goes wrong," Sam said, "and if you're spending all your time defending the exclusions in the fine print, then you won't be able to get the stink off you."
Going on offense means working--as publicly as possible--with governments to prepare for the next pandemic. contributing as much wisdom, technique and discipline as possible. That sort of work has already begun in the U.S., with what's being referred as PRIA (a pandemic version of the Terrorism Risk Insurance Act, or TRIA), and in Europe, with what's being called Pan Re.
Sam said that, while insurers need to stick with a hard no on business interruption claims under policies that were never designed to cover pandemics, they need to say yes in every possible way on service to customers in these difficult times.
"We have to cushion the blow as much as possible," Sam said.
When the industry does good things--and I see many--it also needs to toot its own horn more. Maybe the messages are getting lost in the shuffle because of everything else going on, but it seems to me that the industry could do a lot more to dramatize how it's helping clients. The world is hungry for good-news, human-interest stories these days. Yet a friend of mine told me that his auto insurer, one of the top five, didn't even notify him of a rebate on his premium.
"I saw the news about premium rebates, so I called my company," my friend said. "They told me, yes, we're rebating X dollars. I said, "That's great, but was I just supposed to notice on my statement, or were you ever going to tell me?'"
I suggest we tell people as often as they can stand to hear. So far, insurance commissioners seem to be siding with the carriers on business interruption policies, but lots of other forces are aligning against the industry. Consumer groups are complaining, and politicians are listening. Some civil authorities are using language in shutdown orders designed to trigger insurance coverage, and legislators in several states are considering forcing insurers to cover business interruption claims on the pandemic. Even the president said two weeks ago that insurers should cover many claims. The plaintiffs bar is, of course, ready, willing and able to help with such claims.
If Sam is right--and he's more optimistic than I am--then the industry has time to stand up for itself. But time is running short. If the tide turns, it will likely turn for good.