Tag Archives: covid-19

How COVID Alters Claims Patterns

Claims trends and risk exposures are likely to evolve in both the mid- and long-term as a result of the COVID-19 pandemic. With the reduction in economic activity during lockdown phases, traditional property and liability claims have been subdued, most notably in the aviation and cargo sector, but also in many other industries, with fewer accidents at work, on the roads and in public spaces, according to a new report COVID-19 – Changing Claims Patterns from Allianz Global Corporate & Specialty (AGCS).

Estimates vary, but the insurance industry is currently expected to pay claims related to the pandemic of as much as $110 billion in 2020, according to Lloyd’s. AGCS alone has reserved about €488 million ($571 million) for expected COVID-19 claims, especially for the cancellation of live events and the disruption of movie or film productions in the entertainment industry. 

Surged and subdued

We have seen claims in some lines of business, such as entertainment insurance, surge during COVID-19, while traditional property and liability claims have been subdued during lockdown periods. There is still the potential for claims to occur as factories and businesses restart after periods of hibernation, and given the longer development patterns for third-party claims in casualty lines.

Claims notifications from motor accidents, slips and falls or workplace injuries slowed as more people stayed at home, and with the temporary closure of many shops, airports and businesses during lockdowns across the world. AGCS also noticed a positive impact on U.S. claims settlement from the suspension of courts and trials. 

Some claimants and plaintiffs have been more open to negotiating settlements out of court rather than opting to wait a long time until their case is scheduled – a trend also highlighted in another recent AGCS publication on liability loss trends. In general, claims activity is likely to pick up again following resumption of economic activity.

Property/business interruption 

Property damage claims were not significantly affected by COVID-19, as loss drivers such as weather are not correlated. However, as production lines restart and ramp up, there is risk of machinery breakdown and damage and even fire and explosion. With fewer people potentially onsite, inspections and maintenance may be delayed or loss incidents such as a fire or escape of water may be noticed too late, increasing the severity of damage. 

COVID-19 has caused business closures and disruptions globally – which often may not be covered in the absence of physical damage as a trigger of coverage. However, the pandemic has affected the settlement of standard business interruption (BI) claims in different ways. On one hand, factories in hibernation will not produce large BI claims, as many manufacturers, their and suppliers either shut down or scale back production. When a U.S. automotive supplier was hit by a tornado in the spring, the resulting business interruption loss was lower than it would have been during normal operations. Conversely, containment measures during lockdowns can lead to longer and more costly disruptions as access restrictions prevent effective loss mitigation and prolong the reinstatement period, as a fire and explosion at a chemical plant in South Korea demonstrated. 

Liability and directors & officers (D&O) insurance

To date, AGCS has only seen a few liability claims that are related to COVID-19. However, liability claims are typically long-tail, with a lag in reporting, so general liability and workers’ compensation claims related to COVID-19 may yet materialize. A number of outbreaks of coronavirus have been linked to high-risk environments such as gyms, casinos, care homes, cruise ships or food/meat processing plants. 

A wave of insolvencies, as well as event-driven litigation, could be potential sources of D&O claims. To date, only a relatively small number of securities class action lawsuits related to COVID-19 have been filed in the U.S., including suits against cruise ship lines that suffered outbreaks. The pandemic could trigger further litigation against companies and their directors and officers, if it is perceived that boards failed to prepare adequately for a pandemic or prolonged periods of reduced income. 


The aviation industry has seen few claims directly related to the pandemic to date. In a small number of liability notifications, passengers have sued airlines for cancellations or disruptions. Slip and fall accidents at airports – traditionally one of the most frequent causes of aviation claims – have declined along with the massive reduction in global air traffic, which fell by a record 94% year-on-year in April 2020. 

See also: COVID-19 Sparks Revolution in Claims

Although a large proportion of the world’s airline fleet has been grounded, loss exposures do not just disappear. Instead they change and can create new risk accumulations. For example, grounded aircraft might be exposed to damage from hurricanes, tornados or hailstorms. The risk of shunting or ground incidents also increases and can result in costly claims.

Long-term claims trends 

COVID-19 is accelerating many trends such as a growing reliance on technology and rising awareness of the vulnerabilities of complex global supply chains. Going forward, many businesses are expected to review and de-risk their supply chains and build in more resilience. This could involve some reshoring of critical production areas because of disruption caused by the pandemic. Such a move would likely affect frequency of claims and the costs of any future business interruptions.

Meanwhile, the growth of home working means that companies may have lower property assets and fewer employees onsite in the future, but there would be corresponding changes in workers’ compensation and cyber risks. During the pandemic, cyber risk exposures have heightened, with reports of the number of ransomware and business email compromise attacks increasing. However, to date, AGCS has only seen a small number of cyber claims that are related to COVID-19. 

For additional insights, please visit COVID-19: Changing Claims Patterns.

Future of Insurance: Hyper-Personal

When we say “it’s personal,” we mean it in numerous but equally important ways. 

The future of insurance is personal in the sense that its protection products and services of all types – life, health, accident, property/casualty and other lines of business not yet invented – will increasingly have to be customized and dynamic to meet the needs of each individual customer personally, depending on their constantly changing preferences and life circumstances. This is what I mean by “hyper-personal.”

The future of insurance is also personal because customers are human beings, and these products are typically most needed at times of great personal stress and loss. The ability to understand and share the feelings of customers at these critical times, referred to as empathy, will be more critical and more highly valued than ever in a world where individuality and personalization may be diminished. 

Customer Experience and Risk

The term “customer experience” is often used in a collective sense and measured at a group level, but it’s critical to understand that any such metrics represent the sum total of each and every customer’s personal satisfaction during each and every exposure and interaction with an insurer – not just a single episode at a moment of need. Understanding and measuring customer experience in a hyper-personal way will require innovative but non-intrusive connectivity. Customer engagement will have to become continuous and relevant – what could be more personal than that?  

Risk management is quickly evolving to become risk avoidance. This includes personal auto, home, life and health. Telematics-enabled auto insurance programs are evolving to focus on driver safety and behavior modification – obviously extremely personal and policyholder-specific.

See also: COVID, and How to Pivot to Innovation


COVID-19 has forced most insurance professionals to work from home. Insurance carriers quickly realized that the millions of square feet of office buildings they occupied and paid for on a 24×7 basis are no longer necessary, not even post-pandemic. Work from home is expected to become permanent, or at least partially permanent, whether by employee choice or by necessity. This will permanently alter the personal living and working habits of most people. In addition, COVID-19 forced carriers to redouble their investment in a range of technologies to operate more efficiently without on-site staff. Some of these advances will no doubt result in furloughs and layoffs, some of which will even survive the pandemic. Allstate Insurance recently announced that almost 4,000 of its staff are to be laid off, representing 8% of its workforce. That is highly personal to those people and their families.  

ESG, Diversity and Inclusion

Environmental, social and governance (ESG) criteria typically refers to the consideration of these three factors by investors when choosing which investments to make. Increasingly, insurance corporate boards and management, encouraged by investors and public opinion, are also focusing on sustainability and ethics and moving beyond traditional staffing and recruitment efforts to take meaningful steps toward achieving more diverse and inclusive employee profiles, especially in senior leadership roles. For the beneficiaries of all of these practices, and others affected, this shift will be personal for all parties.    

Automation, Digitization and Re-Skilling and Up-Skilling

Operationally intensive industries – foremost among these insurance –  are experiencing a wave of automation and digitization, accelerated by the COVID-19 pandemic. which will have a major impact on the skills their employees will need and on these companies’ ability to remain relevant and competitive. Technology solutions are enabling machines to perform many of these tasks that formerly required people. In the near future, nearly every job will change, many significantly, and a large majority of current industry employees will need to develop new skills. Not only will that change affect a large percentage of insurance workers personally, but most organizations are not ready to address it. The future of work will require two types of changes across the workforce: upskilling, in which staff gain new skills to help in their current roles, and reskilling, in which staff need the capabilities to take on different or entirely new roles. 

Privacy, Confidentiality and PII

Americans have long taken for granted and protected their privacy and resisted sharing information outside of trusted circles, much less willingly having it collected, stored, used and sold by companies with which they have, or even do not have, a relationship. Gradually, with the rise in the pervasive acceptance and use of social media and connected mobile and digital technologies, more personal data is being shared more frequently. This has brought focus to what is known as personally identifiable information (PII), meaning information that can be used to identify, contact or locate an individual, either alone or combined with other easily accessible sources. Government regulations have emerged. The E.U.’s General Data Protection Regulation (GDPR) requires companies to protect the privacy of their E.U. customers and keep PII safe. Earlier this year, the landmark California Consumer Privacy Act of 2018 (CCPA) came into effect, giving consumers more control over the personal information that businesses collect about them.

See also: COVID and ‘the Great Reset’

The future of insurance is personal, which I believe will make it more relevant and valuable than ever before in its history.

This theme will be explored in depth with industry CEOs and C-level speakers during The Future of Insurance USA from Reuters Insurance Events online, Nov. 16–18, 2020.

COVID, and How to Pivot to Innovation

The global COVID-19 pandemic has almost shut down entire industries, forcing companies of all sizes to adapt and evolve. It has also done incredible things for a pivot to innovation.

Safety has had to come first. And for many, that meant changing how they worked, using technology to power a shift to remote work and servicing of customers. For some, like retailers, restaurants and manufacturers, it meant shutting down key services or production lines and pivoting to new offerings or entering new markets just to survive and stay relevant. Others, rather than just close doors, have repurposed their assets to contribute to the collective effort to fight the crises.

When commercial flights were shut down, airlines like Virgin Atlantic, Lufthansa and American Airlines switched to cargo-only flights. In the U.K., healthy fast-food chain Leon announced it was turning its 65 restaurants into shops, selling meals via both click-and-collect and delivery. Hotels started offering day rates for remote workers. And multiple manufacturers, like Scottish craft beer specialists BrewDog, converted their plants to produce hand sanitizer.

What does it take to shift this fast successfully? And is this kind of progress sustainable?

The reality is that it is not essential that we be thrown into crisis before this kind of change can take place.

With the enforced change in human movement and behavior came a change in customer demand. Businesses had to think and act fast to repurpose assets, talent, resources, distribution channels, offerings. Minus the crisis, it’s what successful businesses do every day.

SpaceX’s giant step

On April 11, 2019 – before we knew what 2020 would bring – a Falcon Heavy rocket was launched Cape Canaveral, FL, making history. It was the first in a new generation of space exploration: a rocket that would not only be able to pilot its way through space but be able to navigate and return to Earth for re-use, radically reducing the cost of space travel.

To achieve this, SpaceX combined radical and creative funding systems, brilliant talent and, perhaps most importantly, vision. But the question at the heart of this isn’t – “How did SpaceX achieve this?”; the question is, “Why didn’t the incumbents?” How has innovation and creativity become so stifled in large, established organizations that it takes a new kid on the block to go, quite literally, where no one has gone before?

It’s about culture, leadership and some very practical steps that enable businesses to be their own catalysts for change, rather than relying on a crisis to spark exponential change.

The DNA of organizations that thrive through change

From Incremental to Exponential, a book I have written with Ismail Amla, looks at what it takes to drive exponential change in an enterprise. We examine five common components that make up the DNA of organizations that thrive through change.

  • Firstly, speed. Leading companies just operate faster – from reviewing strategies to allocating resources. McKinsey research indicates that these companies relocate talent and capital four times more quickly than their less nimble peers.
  • Secondly, being ready to invent. While business need to maintain the profitable elements of what they do, business as usual is dangerous. Leading businesses are investing as much in upgrading the core as they are on innovation.
  • Thirdly, being all-in. These companies aren’t just making decisions faster, the decisions themselves are bolder, braver and further outside the box.
  • Fourthly, making data-driven decisions. Data is providing the fuel to power better and faster decision making. High-performing organizations are three times more likely to say that data and analytics initiatives contribute at least 20% to EBIT. Which is profound.
  • And finally, following the customer. Top companies that sustain a comprehensive focus on the customer (in addition to operational improvements) have been shown to reap economic gains ranging from 20% to 50% of the cost base.

See also: COVID-19’s Once-in-a-Lifetime Opportunity

Optimizing Insurance’s Role in the Pandemic

The nature and scale of the risk of future pandemics far outstrips the insurance industry’s capabilities, so any public-private partnership must make the most of them.

COVID-19 has revealed the expansive landscape of pandemic risk. The federal government has already committed $2.2 trillion to fund pandemic relief programs for individuals, businesses and state and local governments, just for 2020. Congress is currently debating whether to commit an additional $1 billion or $3 billion, with an outcome probably somewhere in between.

Meanwhile, policymakers, commercial interests and the insurance industry have been working through how to prepare for the risk of another pandemic in the years ahead. While they may argue about how much capital the insurance industry should be asked to put at risk against future pandemics (ranging from $0 to $50 billion), even the most aggressive proposals would transfer only about 1% of foreseeable losses to insurers.

Further, those proposals would direct all of the insurance industry’s pandemic risk capacity to take on “business interruption” losses. For example, the Pandemic Risk Insurance Act would give large corporations the tools to make up for lost profits and reduced executive compensation during a pandemic. The proposed Business Continuity and Protection Program, as well as Chubb’s Pandemic Business Interruption Program, would provide benefits similar to those recently paid out under the Paycheck Protection Program.

None of these proposals address any of the other foreseeable pandemic exposures such as third-party liability claimsworkers compensation claims or the cost to remediate contaminated property.

See also: How Risk Managers Must Adapt to COVID

Without a doubt, the insurance industry’s role is severely constrained compared with the enormous scale of the pandemic risk. Accordingly, policymakers must thoughtfully position insurance industry capabilities where they can have the greatest impact for those individuals, state and local governments and businesses suffering financial loss during a pandemic.

The Pandemic Risk Landscape is an effort to provide policymakers and other stakeholders with a practical tool to assist them to consider the optimal positioning of the insurance industry’s capabilities within a public-private partnership. Equipped with a view of the full scale and range of exposures to financial loss confronting families, governments and businesses, policymakers may continue to conclude business interruption is the single best target of insurance industry resources within a public-private partnership. Or, they may find at least some of those limited resources should be allocated to other stakeholders and other exposures to loss.

COVID and ‘the Great Reset’

Although the insurance industry seems to have aggressively and (mostly) successfully shifted toward digital interactions during the pandemic, an even trickier transition lies just ahead as part of what is being called “the Great Reset.”

That transition to a post-pandemic world requires insurers to not just understand the internal workings at their companies, or even the new preferences of that fickle beast known as the customer; it means figuring out what the world of work and home life will look like after the universe resets, so insurers can revise products and revisit sales and marketing tactics. Maybe, for instance, some insurers will want to deemphasize small businesses, in general, as long as so many may go out of business and migrate toward “ghost kitchens” (which only offer takeout or delivery).

To try to help as we all sort through the complexity, I’ve pulled together the smartest thinking I can find on what comes after “the Great Reset.” (Warning: McKinsey provides some serious pessimism at the end of what follows.)

In this article, the consulting firm lays out the broad parameters of what comes next for the economics of home life, including these predictions:

“A 12% drop in private consumption is anticipated in the United States over the next two years, with recovery to pre-crisis levels only by 2023–24…. The explosion of small brands, underway before the pandemic, has given way to a strong preference for global A-brands. After years of growth, out-of-home consumption has almost disappeared; many of us have stopped going to stores entirely….

“Zoom’s daily user base grew from ten million people to 200 million in three months…. At the same time, there has been an enormous rise in unemployment, which is expected to reach approximately 15% when 2020’s third-quarter results for the U.S. are complete.”

Those predictions, if true, suggest not only that insurers will face headwinds with consumers because of a diminished appetite for spending but could also adjust policies and marketing/sales tactics to account for changes in how people use their homes and cars.

Of course, consumer buying behavior spills over into the businesses that serve them. Target, for instance, recently said that while it will hire 130,000 temp workers for the holiday season, the same number as last year, a far greater percentage will support e-commerce. Target, whose e-commerce sales tripled in the second quarter, says twice as many workers as last year will be assigned to help customers with onsite pickup of online orders; Target says that 90% of its online orders are now picked up at stores.

Small businesses have much bigger issues than big box retailers like Target do. How big? A recent headline in Crain’s New York Business said of small businesses, “60% See Survival Past Six Months.” That means, of course, that 40% don’t see survival past six months, yet Crain’s described the outlook as “Less Apocalyptic.”

A new federal rescue package could throw a lifeline to small businesses, but I wouldn’t want to have bet on anything getting through Congress until after the election settles which party has the upper hand — perhaps until after a new Congress is seated in January.

The mix of businesses that are thriving will surely change, too, at least until a vaccine begins to kick in next summer or fall (the time frame that currently seems most likely, though hardly assured) and old habits can begin to reemerge. Movie theaters will have a hard go of it. Inside dining will, too, though those “ghost kitchens” seem to be doing a good business with takeout. Anything associated with tourism will stay muted. Visits to doctors’ offices will remain far less frequent, while telehealth continues to take off. Cushman & Wakefield projects that the vacancy rate for commercial office space will rise from 11% pre-crisis to nearly 16% in the second quarter of 2022 and won’t return to pre-crisis levels until 2025. And so on — all kinds of habits are changing, and new ones are getting plenty of time to take hold.

There will be a good deal of variation by country in terms of what new habits form. McKinsey reports, for instance, that, while 60% of consumers in Italy have shopped online during the crisis, only 10% enjoyed the experience — suggesting that the switch isn’t permanent (or that online stores need to improve a bunch). New behaviors will also depend greatly on the sector involved. McKinsey again: “While use of e-pharmacies… has doubled or tripled in the U.S. over the course of the crisis, only 40% to 60% of consumers express an intent to continue using those services.”

A wild card for all businesses is that the pandemic seems to have thrown brand loyalty out the window. McKinsey finds “an astonishing 75% of U.S. consumers trying a new shopping behavior in response to economic pressures, store closings and changing priorities. This general change in behavior has also been reflected in a shattering of brand loyalties, with 36% of consumers trying a new product brand and 25% incorporating a new private-label brand. Of consumers who have tried different brands, 73% intend to continue to incorporate the new brands into their routine…. The beneficiaries of this shift include big, trusted brands, which are seeing 50% growth during the crisis.”

While the change in brand loyalty seems to apply mostly to retail products, I suspect that “the Great Reset” is making customers more open to changing insurance carriers and agents, too. You can either see that as a threat to your customer base or as an opportunity to poach from others.

The bad news — and I warned there’d be bad news — is that McKinsey projects in this article that the prospects for the entire insurance industry are under pressure.

I know far too much about this work because I was the ghost writer for “Strategy Beyond the Hockey Stick,” the book that three of the article’s authors published in 2018. The simple version of their warning goes like this:

A massive amount of analysis that they’ve done on the profitability of companies and of industries found that the results fit on a power curve: If your company or industry falls in the second, third of fourth quintiles, your results are pretty much the same as all the others in those quintiles. But, if you fall in the top quintile, well, lucky you. Your results are far, far better than those in the middle quintiles. Unfortunately, there’s a tail, too; if you’re in the bottom quintile, your results are far worse. And the McKinsey research for this recent article found that the pandemic is making the rich richer and the poor poorer. So, those industries in the bottom quintile, like insurance, have even more of a mountain to climb than they did before.

The good news is that the changing landscape creates opportunities for smart insurers. Life insurers have clear opportunities because COVID-19 has raised awareness. The trend toward telehealth offers big opportunities for not only health insurers but for those involved in workers’ comp. And “the Great Reset” opens the way for all sorts of insurers if they adapt quickly to how consumers and businesses will operate.

Stay safe.


P.S. Here are the six articles I’d like to highlight from the past week:

Where Blockchain Shines Right Now

The seafood supply chain, for instance, can become transparent and trustworthy, while blockchain automates location updates.

Reflections on Insurtech and the Pandemic

Will the dramatic change to work and life patterns unleash innovative startups and new rounds of funding?

Did Pandemic Kill Intuition? No, but…

With the pandemic throwing historic data out the window, more algorithms and AI are being used in what might be called bionic decision-making.

A Commercial Claim’s Journey, With AI

AI is still very new to insurance, and claims teams are only scratching the surface on how it can be applied for the betterment of all constituents.

Life Insurance’s New Occupation

Insurers must rethink their scope, away from a policy transaction and to a broader lifestyle experience across health, wealth and wellness.

Adios to ‘3 Lines of Defense’ Risk Model

The only way forward is building an effective risk culture and teaching everyone in the company radical risk management skills.