Tag Archives: covid-19

Is Insurance Office Going Away for Good?

The coronavirus pandemic is already changing the way that American businesses operate, at least temporarily. But look closely, and you can see the potential for long-lasting changes even after life returns to normal. 

One of these shifts might just mean the end of the traditional insurance office. 

Pandemic-related lockdowns have already forced many major companies to expand work-from-home policies on a short-term basis. Having tried it, some employees and their bosses are considering more permanent changes. 

Nationwide Mutual Insurance is going even further. One of the leading life insurance and retirement companies, it moved 98% of its 27,000 employees to working from home in less than a week in early March. 

CEO Kirt Walker told Fortune magazine that management found no changes in key performance indicators and no negative feedback from customers. 

“We keep hearing from members, ‘if you hadn’t announced you were all working from home, we never would have known,'” he said. 

The Fortune 500 company decided to make the change permanent and has already shuttered five offices in Florida, North Carolina, Pennsylvania, Virginia and Wisconsin, and plans to shrink from 20 offices to just four. 

As you face similar issues at your business, there are short-term, intermediate and long-term issues to consider.

Short-Term Issues

In the past, employees who worked from home had designed a setup that worked for them. Many workers today are doing so under duress. 

Working from home during the coronavirus pandemic is complicated by schools being closed and businesses and workers having no warning.

Taking care of your school-age children, helping with their online learning, sharing home computers and internet bandwidth are all challenging experiences.

Not having the option of going to the office at all is not the best way to make work from home work on a permanent basis.

See also: COVID-19: Moral Imperative for the Insurance Industry  

Intermediate-Term Issues

The coronavirus is going to be with us for a while. Fear of travel and fear of crowds is going to make it hard to convince employees to return to work. Lack of childcare options will continue to be a problem. Even when schools reopen, they may do so under staggered or limited school times.

These issues are going to last for more than the coming 12 months. Now is the time to adjust to the drawbacks of the current forced and hurried experience.

You may need to invest in better laptops and other equipment for your newly remote workers. Your work-from-home staff needs quality video cameras and audio to participate in the increasingly common online meetings. 

While your staff may have a home computer their kids use for gaming that has these features, you really do not want to expose your business systems and data to your employees’ children’s computers. You would not be pleased if your staff let their kids access the computers in your office. Why would you want your staff working from their kids’ devices?

You may need to provide cell phone or better phone solutions for your home staff. For security reasons, you do not want to have company contacts and emails on your employees’ personal phones.

You need to hold regular weekly companywide or department-wide video meetings with your staff. People need to keep the connections with the folks they have been working with in your office.

It is probably a bad idea to have your staff take the computers and printers they currently have in your office home. Most traditional stay-at-home options are combined with remote access to networks and servers used through your current computers at your current physical office.

You need to put in place online methods for your customers to interact with your staff. This means increased use of digital signatures, electronic payments and online video meetings.

Long-Term Decisions

Even in the current situation, working from home provides some positives that you should consider.

Studies over the last several years consistently show benefits to your staff and your company. These include:

  • 13% to 22% increase in productivity
  • Increased employee retention
  • Lower cost for everything from rent, to office supplies, to office snacks
  • Generally happier staff, higher employee morale

Increased productivity and lower costs are two things your business could always benefit from. In the coming economic challenge – whether it turns out to be a recession or even a depression – these may simply be competitive advantages you need.

Take this time to plan how you should restructure your business now. As things settle out you need to have permanent adjustments identified and ready to go.

See also: Will COVID-19 Spur Life Insurance Sales?  

The future comes gradually, and then all at once. We may be at one of those tipping points, where companies shift from traditional offices in downtown buildings to employees working from home. 

Now is the time to start planning for that future. 

4 Key Changes to WC From COVID-19

COVID-19 and the onset of a deep global recession are reshaping every corner of workers’ compensation, from legal issues surrounding coverage to the delivery of care to injured workers. Some of the changes can be anticipated based on prior recessions. But others are new and highly dynamic and will vary based on the course of the pandemic.

Amid the flux, we see four changes that are critical for carriers to grapple with. How companies respond to these changes may determine their survival in an extremely challenging economic environment. Fitch is expecting a five-year high default rate this month, and economists are expecting even more bankruptcies in the current downturn than in the Great Recession in 2008-2009. Even well-capitalized companies need to quickly adapt.

A Shift in the Types of Claims Filed

Carriers are seeing a sudden shift in the flow of new workers’ comp claims. On the one hand, aggregate claim volume has dropped 40% or more. This is primarily due to the slowdown in activity and hours worked in industries that traditionally drive a high number of claims, especially retail and hospitality. In addition, roads now have 80% less traffic, so there are far fewer accidents and claims from drivers on the job.

At the same time, new types of claims are emerging. Most specifically, COVID-19 claims are rising sharply. As many as 1,500 had been filed in California alone by late April, according to the California Department of Industrial Relations. The share of new COVID-19 related claims flowing into CLARA Analytics’ cross-industry data lake jumped from 1% in March to 4% in April.

The large majority of these claims are from healthcare workers who interact with patients and first responders such as EMTs and firefighters. Many of these cases are likely to be covered under workers’ compensation, pending an array of actions at the state level to cover these workers, such as Kentucky’s state order on April 9.

We should also expect to see a rise in claims from employees who have been recently furloughed. This is driven in part by situations where an employee has an injury that he or she might not normally have filed a claim for in a healthy economy but decides to file the claim given a declining bank account. Experience from prior recessions indicates these situations skew toward cumulative trauma claims, which are complex and costly to manage.

Changes in Healthcare Delivery

Social distancing and crowded hospitals are also leading to treatment delays for non-critical cases, including both recent and long-standing worker injuries. This will create extended periods of disability, more expensive claims and potential litigation. The impact of these delays will depend on the duration of the pandemic. If the impact on hospitals extends deep into the summer or there is a resurgence of the virus in the fall, there could be a new wave of issues for claimants, employers and carriers.

See also: COVID-19’s Impact on Workers’ Comp  

One benefit: The delays are pushing claimants to seek care in new ways, including telemedicine. Services like Righttime and One Call have seen a 2,000% increase in the use of telemedicine in just the past few weeks. Quicker, easier access to physicians may drive better outcomes and enable incapacitated workers to get care they might not otherwise get, which could lead to lower health-related costs.

More Fraud

Experts predict a rise in fraud in the coming months, as COVID-19 opens up opportunities for new scams by the segment of attorneys and providers known to engage in workers’ comp fraud. We will likely also see more claims that are challenging to define as legitimate or fraudulent because they occurred in a distributed work environment where there are no witnesses to corroborate the injury. Even the definition of a workplace injury is strained in a work-from-home situation.

In response, investigation teams are investing in expanding their online detection practices. AI-based data analysis and predictions can open up insights. “Advancements in AI now enable claims teams to see through hidden provider links, complex supply chains and long lag times to identify fraud that previously went unnoticed,” said Dr. Gregory Johnson, a medical cost consultant and former director of medical analytics at the California Workers’ Compensation Insurance Rating Bureau.

A Rise in Litigation

A set of states have recently issued executive orders and directives that shape COVID-19-related workers’ comp coverage, and some states, like California, are on the verge of doing so. As we’ve seen in the past, new legislation drives legal activity, so we can expect to see an increase in COVID-19 litigation over the next few months.

Litigation may also rise from the increase in terminations. An abrupt layoff can leave employees feeling aggrieved. In other cases, workers may simply be anxious to cover an income gap or are uncertain whether to file a workers’ comp or unemployment insurance claim. Unreported or latent injuries can come to the fore and result in a sharp rise in workers’ comp claims.

“Companies that initiate layoffs with little forethought and guidance may see a rise in workers’ compensation claims and experience numerous other unintended consequences,” said Kevin Combes, Aon’s director of U.S. casualty claims, Global Risk Consulting. In the last recession, Aon saw post-termination claims surge at companies that did not manage the event. “Companies that develop thoughtful reduction-in-force strategies are likely to see fewer workers’ comp claims and lower overall expenses,” Combes said.

A Reason for Optimism

Some of the changes we’re seeing, while disruptive, could have major long-term benefits. New healthcare treatments and delivery channels may emerge that improve outcomes and lower costs. Both private and public players in the workers’ comp system are adopting virtual case reviews, settlement discussions and other practices that might also increase efficiency and system access.

In addition, factors that drive cost in the industry may be seeing positive short-term shifts. For example, many claimants and attorneys may be focused on near-term cashflow and are less intent on maximizing claim values by stretching out litigation. As a result, many of CLARA’s customers are seeing cases move to settlement more quickly, at or below reserve estimates. This may be a prime opportunity to resolve stubborn cases or resolve new ones quickly.

Short-Term Disruption, Long-Term Progress

Claims operations at carriers and third-party administrators are not standing still. They are taking steps to respond and prepare for the future. The most aggressive are preparing teams to handle the shift in claims, including new training and handling procedures and updated case reserve guidelines. Many are evaluating new tools and programs to optimize organizational productivity in anticipation of eventual recovery. Principal among the tools available to manage this new world are the AI applications that have recently come to market.

See also: Impact of COVID-19 on Workers’ Comp  

It’s an ideal time to be evaluating AI, which can dynamically update models to account for changes in claims types and trends. By applying AI, claims teams can identify providers to bring into their networks and evaluate and optimize the performance of their attorney panels with evidence from prior outcomes. AI also can aid in making smarter decisions about when to settle a claim and when to litigate.

By investing now in talent and technology, claims teams set themselves up for success when we move into recovery.

To provide a deeper exploration of these trends and best practices, CLARA Analytics has published a whitepaper, “A Perfect Storm: Six Steps Top Claims Teams Are Taking to Navigate COVID-19 Turbulence in the Workers’ Compensation Market.”

As first published in Claims Journal.

COVID-19’s Once-in-a-Lifetime Opportunity

My article on the longer-term business model implications of Covid-19 asked whether COVID-19 creates an opening for new, or updated, products and services that insurers should be offering to the market. This article is an attempt to answer that question, focusing on P&C/general insurance.

Personal Lines

Given its scale, let’s start with auto/motor. So far, we’ve seen major reductions in vehicle usage, and many insurers returning premium to policyholders. But what will happen next? Two potential scenarios are:

  1. People wonder why they’re paying for vehicles they’re not using, and sell (or end finance arrangements on) one or more vehicles, taking up any slack by using rideshare companies or (cheaper) public transport. The auto insurance market shrinks.
  2. People reconsider the risks to their health of using public or shared transport, so reduce their usage and buy a car instead. The auto insurance market expands.

Either scenario is believable, and I suspect both will be true, each applying to different cohorts of customers. Someone living in an area with no public transport and minimal rideshare coverage may well make a different decision from someone in the opposite position.

If this is correct, insurers need to be thinking about the potentially changing needs of different customer cohorts and adapting their sales and marketing efforts accordingly.

There’s scope for product changes, too.

Concerns about paying premiums for unused vehicles could certainly lead to increased take-up of existing usage-based, or pay-as-you-go, insurance.

But insurers could also offer some innovative “in between” options. For example, where mileage driven is a material rating factor, perhaps the customer could have the option to submit monthly odometer readings and have the premium adjusted automatically — just as many energy companies do. Thanks, Charles Bryan, for that idea.

Turning to homeowners and renters insurance, there are product development opportunities here, too. If I’m spending much more time at home, I’m far less likely to be subjected to theft or burglary. I may have a slightly increased risk of fire breaking out (increasing claim frequency), but I’m also far more likely to notice this early, reducing claim severity. Damage through escape of water is also likely to be noticed much earlier than if the home is empty all day. So – why am I paying the same premium on days that I’m a lower risk than I pay in normal circumstances? Wouldn’t I be attracted to a usage-based or pay-as-you-go proposition for my homeowners or renters insurance if one was offered?

But also, if I’m doing my day job from home, won’t I need additional covers? What if I somehow mess up while working from home, in a way that wouldn’t happen if I was at my employer’s premises? Maybe there’s a computer virus lurking on my home network, just itching to break into my work laptop via that free conferencing app I just found. Does my existing liability or umbrella cover protect me? Or is this another opportunity for insurers to provide further covers for those feeling nervous about working from home?

See also: Pulse of Insurance Shopping During Crisis  

What about pet insurance? Am I less likely to have to make a claim on such a policy if I’m spending more time at home with my pet, and exercising him or her more often? Should my insurer take that into account in its pricing? And how might my insurer take account of the fact that the pandemic closed many veterinarians’ offices?

How about travel insurance? (Thanks, Julie Culligan.) Clearly, there’s been a downturn in this product’s attractiveness over the last couple of months. I’ve certainly not renewed my own annual travel policy this time around. But what happens when people can travel again? Perhaps potential customers in a post-pandemic world will now be more aware of the risk they’re taking if they book vacations uninsured. Does this provide new opportunities for insurers? If so, do covers need to be adjusted to provide comfort to customers that the events they’ve seen in the COVID-19 pandemic will definitely be covered next time around? Will customers be prepared to pay more?

Is there any scope for developing new products or new covers altogether? Here are some initial thoughts:

Many people have now realized that their home broadband connection is more critical than they thought. Without a working connection, children can’t attend video lessons, parents can’t work remotely and the family’s entertainment options in their downtime are much more limited. Is there scope for an internet interruption product? Or even something more sophisticated that underwrites a certain level of internet bandwidth or internet speed, given multiple concurrent users?

How about personal technology and cybersecurity products? There’s a good chance that, once people’s incomes have returned, they’ll be upgrading their home tech to provide larger screens, more stable video-conferencing, and better Wi-Fi – all in case there’s a second spike. Does that provide a one-off opportunity for smart insurers to alert existing or potential customers to technology risks more generally? And should insurers consider providing cybersecurity audits to personal lines customers in the same way as some do for businesses?

Those are my initial thoughts. Are there any other personal lines product or service opportunities that insurers should be thinking about?

Commercial Lines

Some of the themes explored under personal lines are equally applicable for commercial lines insurers. 

For example, many businesses, as well as individuals, will have vehicles sitting unused. And they, too, may be considering making changes to their fleet when they can. The ideas discussed above, in the context of personal lines, apply to commercial auto, as well.

Commercial property considerations, on the other hand, work in reverse from personal lines. Instead of being unexpectedly occupied, many commercial premises are now unexpectedly empty – increasing the risk of major theft, fire and water claims. Did the rating of these businesses’ polices anticipate this possibility? If not, is some element of flexible, usage-based insurance needed for commercial property, so as not to undercharge for these risks again? 

Turning to more specific commercial lines products, much has already been written about business interruption insurance. In some jurisdictions, commercial lines policyholders have been very surprised to discover that their business interruption cover doesn’t cover this particular business interruption. Legal action and, in some jurisdictions, legislation is on its way to resolve the issue this time around. But what about next time? What is the opportunity available for the insurer that states, unequivocally, that the temporary closure of a company’s business by government edict will be covered by insurance?

And how about a business disruption that doesn’t go as far as a full interruption? As I wrote in my earlier article, many companies that could otherwise have stayed open found that their supply chains were no longer supplying – either because of the suppliers’ own business problems, or because the country in which the supplier was resident had banned the export of their supplies. Is this type of business disruption already covered by a typical business interruption policy? If not, does that create another opportunity for insurers to innovate? Especially as a “mere” epidemic in the supplier’s country might have the same impact in fthe uture as the current pandemic.

Turning to workers’ compensation, are employees covered by a business’s standard policy even when they are working from home? Even if their working from home was never expected, and therefore never considered, or priced, by the insurer? Unless the answer to both those questions is yes, then these products will also need to be re-written, or have optional covers added, to account for similar occurrences in the future.

And how about cybersecurity cover? We looked at that, above, as a potential new opportunity for personal lines. But should the experience of the pandemic drive changes to the product in a commercial lines context? I know of a case where an IT employee, who had never previously worked from home, was forced to do so because of COVID-19. When making an update to the company’s core systems, he used his home PC — to which he would not normally have access when at work — and triggered a company-wide ransomware attack. Whether that completely unexpected act is covered by the company’s cybersecurity insurance, the key question for me is whether it should be covered in the future, at least as an option, given what the insurer now knows about that particular risk. Either way, the chances are that the product needs to be redesigned.

See also: Parametric Insurance: Is It the Future?

Again, those are just my initial thoughts for commercial lines in the wake of the coronavirus. But are there any other commercial lines product or service opportunities that insurers should be thinking about?

* * *

One final thought, which applies to both personal lines and commercial lines, and therefore to the P&C/general insurance industry in general:

If there is one positive for insurers arising from COVID-19, it’s that most people in the world, whether currently insured or not, are now much more aware of the massive impact that an apparently small risk can have on both them and their business.

If insurers take steps to tailor their products and services, and to innovate based on what they have learned, there is a once-in-a-lifetime opportunity to educate potential buyers on the value of insurance — and hence expand the market.

Will COVID-19 Spur Life Insurance Sales?

As the pandemic began to sweep across the world, reports of people panic-buying life insurance appeared in the media. RGA reviewed the available data to determine if a COVID-19-inspired spike in sales is in fact taking place and to consider whether the current crisis could prove to be the tipping point for a new era of digital life insurance sales.

Most people have a problem that life insurance can solve: If your family would struggle to survive the permanent loss of your salary, then life insurance could be vital. This is the case for hundreds of millions of people around the world.

The challenge is that most people do not realize they have this problem. Few people spend time thinking about the consequences of low-probability events and are therefore disinclined to consider the need for life insurance. This has given rise to the industry adage: Life insurance is sold, not bought. 

But surely the COVID-19 pandemic has awakened public awareness of the need for life insurance, right? With the world shut down and media reports filled with stories of tragic loss of life, people are increasingly aware that good health and a long life cannot be taken for granted.

Initial media reports spoke of COVID-19 fears leading to increased online life insurance sales, with Forbes even reporting evidence of “panic shopping.” At RGA, we have been actively analyzing available data to identify and try to explain any early patterns. 

Early data indicates limited early impact

We began with Google Trends data to determine how searches for life insurance have been affected.

Source: Google

NB: The chart covers May 10, 2015, to April 26, 2020. The data is based on random sample of searches, excluding duplicates by user. Results are relative to all other Google searches during that period and geography – decreases are relative to other searches, not necessarily absolute. 100 = highest relative search volume for that term.

As the graph shows, worldwide searches for “life insurance” have risen steadily over the last five years and peaked from January to early March 2020, coinciding with the beginning of the COVID-19 outbreak. However, searches have since fallen back to pre-virus levels. Furthermore, this peak did not occur in all countries. Analysis at a country level shows that the U.K. and U.S. mirror, and perhaps drive, the global pattern, but no discernible peaks or subsequent decreases coincide with COVID-19 outbreaks in Italy, China, Germany, Australia, India or South Africa.

We should be cautious about drawing too many conclusions from Google Trends data. Considerable noise and fluctuations make it difficult to distinguish clear effects from statistical randomness or other patterns. For example, similar Q1 trends occur in the previous four years – although the March 2020 decrease is much larger than in these earlier years. Most importantly, Google Trends does not indicate causation. For example, some people may have been searching simply to check if their life insurance policy likely covered COVID-19.

Yet evidence from other sources supports the U.S. Google Trends pattern. A  LIMRA survey of 47 U.S. insurers assessed the impact of COVID-19 on individual life sales and applications in the U.S. 24% of companies reported that online and mobile applications rose in March, but 63% reported either no change or a decline. Only 7% saw an increase in face-to-face applications and 9% an increase in call center or mail applications.  Nearly half of companies said they were expecting a decline in sales in March, with 20% expecting a decrease of 10% or more. How this reflects normal seasonal fluctuations is unclear, but most companies were expecting sales in the full first quarter to be flat at best. 

According to the MIB Life Index, which measures U.S. life insurance application activity, demand for policies in January and February reached its highest level since 2015 but then dropped by 6.7% in March and a further 5.5% in April. This was a year-on-year fall of 2.2% in March and 3% in April.  

See also: Fundamental Shift in Life Insurance?  

Data available to date suggests that, even if an initial COVID-19-related bump in applications occurred in some markets, that bump was both limited in time and geographic spread and may be outweighed by a subsequent drop in applications. So we must now ask: Why has COVID-19 had such a seemingly limited impact? 

Life insurance is still sold, not bought 

It is possible that any initial rise in searches and applications came from those already considering life insurance and for whom COVID-19 acted as a final spur and accelerant. Some media reports support this thesis. This could also explain why the sales impact was greatest in those markets where it is easy to buy life insurance online or where consumers are accustomed to buying other financial products online. Similarly, advisers may have accelerated sales ahead of the lockdown, as they anticipated delays and restrictions on medicals, lab tests and other underwriting requirements. The subsequent reduction could also then reflect the delays and restrictions that people experienced once the lockdown began.

For the majority of those people not already considering life insurance, data indicates the pandemic has not motivated them to make a purchase. Also, the subsequent drop in searches does not suggest consumers are trying to buy online but finding it difficult to do so. The key reason, of course, may be economic. Most people do not view life insurance as an absolute essential, so if the primary breadwinner has lost, or is at risk of losing, his/her job, it is unlikely the person will decide now is the time to spend discretionary money on life insurance.

This is another reason why, counterintuitively, now might be a bad time to be promoting life insurance. It is easy to forget many people have an instinctive negative reaction to talking about money in relation to death. We are hearing about an increase in complaints and negative comments in response to online ads for life insurance, even when they are seemingly innocuous and make no reference to COVID-19. One prominent clergyman in the U.K. has even criticized the “grim promotion” of life insurance ads on Twitter. Many insurers have recognized this and are delaying planned email marketing pushes.

It may also be that the risk of COVID-19 is still too abstract for most people. One of the main triggers for purchasing life insurance occurs when someone we know passes away, especially if that individual is young and leaves behind a family. This was highlighted earlier in 2020 with the death of basketball legend Kobe Bryant. The volume of life insurance application requests and submissions spiked by over 50% in the days after the 41-year-old’s death on January 26, before returning to normal levels within a week, according to True Blue Life Insurance, an online aggregator and comparison site for life insurance. True Blue’s CEO commented: “In a lot of the phone calls to our agents, Kobe came up.” 

Whereas a personal story of loss such as Kobe Bryant’s can significantly affect numbers and statistics, the risk of COVID-19 may still feel distant and theoretical for many people. 

Or perhaps this crisis is just another reminder that the life insurance industry has not yet cracked the digital distribution challenge. Buying life insurance is not natural human behavior. In fact, from a behavioral science perspective, it is probably one of the hardest products to sell. We are drawn to personal, immediate and certain rewards – but the rewards of life insurance are for others, seem distant and often appear uncertain.

People need to be persuaded to buy life insurance, and the human-to-human approach remains the most effective. Even if we see an increase in online applications, it may not make up for losses incurred from sales teams’ inability to go out and sell. For example, Ping An in China has reported a hit to sales driven by a decline in face-to-face services.

An uncertain future

It may be that COVID-19 will eventually help drive demand for life insurance, but not quite yet. As lockdowns began and people were stuck at home, often juggling work and parental responsibilities, life may have simply become too busy to think about life insurance, especially as many came to grips with social distancing and other disruptive public health measures. We are still in the eye of the pandemic storm, and people have more immediate concerns than life insurance.

COVID-19 could create fertile ground for future sales opportunities. It has been suggested that younger generations, especially in developed markets, view life insurance as less necessary than previous generations did at the same age.  

See also: Pulse of Insurance Shopping During Crisis  

This may change in a world where illness or accident is no longer a distant threat and where we can clearly demonstrate the value of life insurance to people. Once the immediate COVID-19 fear has passed, insurers may find it easier to help consumers appreciate the “peace of mind” that life insurance brings. 

It is clearly too early to draw conclusions about how COVID-19 will change society and undoubtedly too early to be certain how it will affect demand for life insurance. However, at the moment the evidence suggests that the adage about ‘life insurance being sold, not bought’ still rings true. COVID-19 is hampering the intermediary sales channel more than at any time in living memory. For many developed markets, this merely highlights a problem expected to occur in the next few years anyway as the intermediary market continues to age and shrink. 

In recent years, the life insurance industry worldwide has made great strides in making life insurance easier to buy. The focus may now need to shift toward finding ways to make it easier to sell.

Managing Risk in a Pandemic

As companies emerge from government-mandated COVID-19 shutdowns and begin re-opening, they will have to balance a desire to resume operations with the risk of a liability exposure from customers or employees who get sick and claim the business was to blame. In tomorrow’s fragile economic recovery, such litigation could mean the end of a business.

Small businesses and retail in particular will need to take reasonable steps to open safely, following recommended measures to minimize the risk of transmission and infection among people before re-opening their doors to a willing public.

Even if a business adopts all prudent measures, there is so much we don’t yet know about the transmission of the COVID-19 virus or its prevalence that there remains a chance of people being exposed and getting ill. And where there’s a chance of exposure, there’s also a chance of businesses facing liability lawsuits alleging their preventive efforts were negligent and to blame for someone’s illness or death.

If businesses choose to open, and not avoid the risk by remaining closed until safety is more assured, they will have few options to transfer their liability risk. One option eventually will be new pandemic liability policies and endorsements, which are sure to be developed by the insurance industry soon. These likely will be quite costly and perhaps unaffordable to small business until the risk is better quantified. Small business associations might eventually develop group captives or risk-sharing mechanisms as an alternative, but those also will take time to set up and price the risk.

A more fundamental option for non-essential businesses to transfer the risk from opening their doors might be to implement some sort of hold harmless agreement. Such an instrument would require people to waive liability for their voluntary patronage of a non-essential business, such as a retail store, restaurant, hairdresser, sporting event and so on. This kind of agreement seems especially applicable when we know so little about the transmission of the COVID-19 virus, and going out into this unknown environment seems risky.

Hold harmless agreements are widely used but often overlooked. Have you ever read the fine print on a parking ticket, or read the waiver you sign when you participate in an athletic event or activity like a zip line ride? With modern technology, there likely are more efficient digital ways to present a waiver of liability before one enters a business, requiring a person to give consent and to record that agreement.

When a business does all the right things, it shouldn’t bear all the liability arising from a pandemic virus. While a customer may have a reasonable expectation of safety entering premises open for business, with coronavirus unknowns the customer is assuming some risk. Asserting one’s freedom to engage in non-essential activities like shopping for garden supplies, getting a haircut, going to a concert or eating at a restaurant four-top also requires the customer to assume some responsibility for the risk of infection.

When someone engages in a high-risk activity like skydiving, the person typically is asked to sign a liability waiver, acknowledging there are risks and expressing a willingness to assume them. This doesn’t eliminate the risk—it shifts it to the consumer. Obviously, if one doesn’t wish to bear the risk of horrible injury, one shouldn’t jump out of a plane and find the parachute doesn’t work as well as the laws of physics.

We know the industry is looking to develop insurance solutions for the business liability risk, but, if individuals are assuming a greater personal risk, might there be an opportunity?

Maybe this unprecedented situation calls for some form of personal accident insurance, or an endorsement to another policy like health insurance, that would cover medical expenses, loss of income or even death benefits if someone is exposed to a pandemic virus after shutdown orders are lifted. This sort of insurance would not only provide financial relief for a loss, but also peace of mind amid the unknown exposure risks of a pandemic.

Airlines, event organizers and so on could even embed such voluntary coverage in the price of a ticket, perhaps for a limited time at risk, such as a two-week period of incubation after an event.

Maybe there’s also a market for a transmission liability risk, protecting an individual from being sued by another party for causing an infection. This could be structured as an endorsement to liability protection in homeowners or umbrella coverages.

Who knows—for the first time the industry could come up with a product that people want to buy, not one they have to buy.

See also: Rethinking Risk Management in a COVID-19 World  

All of the above presumes that businesses and customers act responsibly and take preventive measures to minimize exposing themselves and others, and do not negligently embrace the contagion. What about situations—which sadly are emerging more frequently as shutdowns ease and people balk at stay-at-home restrictions—in which neither party shows a regard for public safety and exposes themselves and others to a risk of infection?

People may have a right to put themselves in harm’s way, but do they have a right to expose others to harm? Throughout all of our communities are those who choose individual freedom and ignore potential adverse consequences to themselves and their community. This raises a significant challenge to both risk managers and legislators and raises a basic question: Who is responsible for managing the risk of coronavirus transmission?

While there’s a lot of uncertainty and misinformation about COVID-19, there’s almost universal agreement that, once infected, people can spread the virus to others. Borrowing from science fiction vernacular, COVID-19 acts like a microscopic alien life form, with humans as non-voluntary and unwitting hosts. This alien life form enters the body, adapts to the host’s DNA, thus converting every host into a potential killer. Even when a host is unaffected by symptoms, and may forever be unaware of having been a host, COVID-19 makes all infected people the contemporary version of a Trojan horse.

For policymakers, carriers, regulators and consumers thinking about ways to provide an incentive people to better manage this risk, consider the following “what if” scenario about introducing potential consequences of not following current mandated guidelines meant to manage the spread of COVID-19.

Let’s assume that, in a rebound of the virus later this year, the capacity of medical resources to care for the infected and ill ranges from scarce to completely overwhelmed. What if our individual access to the full measure of available medical services were to become largely decided by our own choices and risk management attitude? 

Person A goes to a hospital to be tested. The attending physician captures the person’s contact history over the prior week. On the list is a sports bar and grill, which brings follow-up questions regarding that establishment and whether it followed social distancing and personal protective equipment guidelines. The patient replies, “The place was jammed, they had a band, and you couldn’t find a mask anywhere. It was great—just like old times!” The physician thanks the patient and promises to follow up with the test results. Patient A later receives a call at home. “We got your test back and are sorry to inform you of a positive result. We have already called in a script for a Z-Pak. However, I must also inform you we cannot treat you in the hospital if your condition worsens given that you chose to ignore current safety guidelines. We have limited capacity, and every serious case puts our staff at risk. We hope you feel better soon.”

Patient B also tests positive. This patient’s contact history reflects adherence to established guidelines regarding social distancing and protective gear. This patient gets a phone call that goes something like this: “We got your test back and are sorry to inform you of a positive result. We have gone ahead and called in a script for antivirals. I can assure you that, should your condition deteriorate, we will treat you here in the hospital.”

We believe insurance can offer solutions to help responsible businesses and individuals transfer some of the financial risk arising from a pandemic, but we also caution against a mindset that whenever a loss occurs “insurance can pay for it” without also introducing incentives for businesses and individuals to be smarter about risk management.