Tag Archives: pandemic

Fundamental Shift in Life Insurance?

We are living through extraordinary times, the first truly worldwide pandemic in our lifetimes, which has effectively halted economies and introduced the concepts of #socialdistancing and #flatteningthecurve into the vernacular (not to mention #PPE). Beyond the horrific infection rate and loss of life, coronavirus’ impact on travel, retail, hospitality and other industries has been so profound that it may take years to recover. However, it has had at least one positive impact — the pandemic has forced people to confront their mortality in a way that larger threats (heart disease, car accidents, diabetes) haven’t over the last 10 years. 

Life insurance penetration (the percent of adults who have at least one policy) stands at only 57%, down from 63% in 2011. Half are underinsured relative to replacing their income for their family, as the role of life insurance is to replace the current and future income of the person insured (as a rule of thumb, coverage should be at least 10-12 times the insured person’s annual income).

Demand is at the highest level in 10 years

COVID-19 seems to have created a “wake up” moment, raising awareness of the need to protect families and loved ones if something was to happen. Demand for life insurance has spiked and is at its highest since 2011, according to Google Trends, which tracks the relative interest of keywords (in this case “life insurance” as a phrase) over time (100 means the highest interest over the period covered):

This trend has been echoed in numerous discussions with carriers and reinsurers, and this interest will likely continue for a time even after the virus is brought under control. 

Macro trends of direct-to-consumer policy originations and automated underwriting will accelerate

With shelter at home, people can’t meet with an agent or have a physical exam when applying for life insurance. This has accelerated a trend toward automated/virtual underwriting and originating policies directly with consumers by carriers (Mobile/Online applications were up 24% in March, according to one study). The need for electronic data, delivered in real time as part of an online underwriting process, has risen as carriers and reinsurers are looking for tools to replace the paramed exam, where someone comes to your home or office to draw fluids and collect other medical data. While current automated data sources (Rx, Lexus-Nexus, MIB, MVR) have been used for several years for both full and accelerated underwriting, there is an opportunity to leverage new sources such as oral health to provide more robust information to assist with underwriting.

In addition, agents can’t have clients come to their offices (or go to their homes), so consumers are searching online and finding a host of carriers and insurtech companies, not to mention marketplaces, where they can get quotes and apply/get covered without leaving their homes.

COVID-19 has, however, created problems for underwriters and actuaries, who are having a lot of sleepless nights trying to figure out how to account for COVID-19 as part of the application process.

See also: Pulse of Insurance Shopping During Crisis

Despite COVID-19, net mortality rates may actually decline

While coronavirus is difficult to screen for, carriers have developed tele-exams and questions to at least reduce the risk of underwriting someone with the virus. Even more significantly, it’s possible overall mortality rates could fall due to shelter-at-home orders affecting 97% of the country. 

Based on CDC data, almost 170,000 people die from accidents each year, 40,000 of those in car accidents. With driving down so significantly that auto insurers are giving rebates to customers, and other activity curtailed, data from the CDC indicates that deaths may actually be down over the same period as last year. Regardless, because the highest mortality rates are older individuals who are less likely to get term insurance (91% of COVID-19 deaths to date are 55 or older, with 78% 65 or older), it is possible that lower accidental death rates would more than offset the mortality risk of coronavirus for 25- to 54-year-olds (who are the prime target for term life insurance).

While the COVID-19 pandemic is a terrible crisis, one small benefit is that it’s raised awareness of the need for life insurance in families throughout the U.S. (which isn’t in the top 10 countries in terms of coverage). Finding ways to originate and underwrite remotely (including leveraging new forms of data delivered in real time) can help meet this need and perhaps reverse a multi-decade decline in life insurance coverage.

Sustainability in the Time of Coronavirus?

Since the world went on lockdown to stop the spread of the novel coronavirus (COVID-19), satellite images from NASA have captured an unlikely view of planet Earth. Pictures from space showed a dramatic drop in pollution over Wuhan after the central Chinese city implemented coronavirus-related restrictions.

You don’t have to circumnavigate the globe from a spaceship to witness the effects the current pandemic is having on our planet. Urban waterways have cleared up in the absence of human activity. Vapor trails from passenger planes no longer streak the skies above us. Rush hour traffic is nonexistent—it’s like driving to work on a holiday.

The natural world is getting a much-welcomed reprieve from human activity. With national parks closed to tourists, the animals in those parks have begun to move freely about areas that would otherwise be populated by humans taking photographs. At Yosemite National Park in California, rangers have witnessed black bears walking in the middle of the road. And at South Africa’s Kruger National Park, a pride of lions was seen sleeping on a paved roadway that was devoid of motor traffic or any human activity.

Earth is also taking a breather from the constant onslaught of pollutants that humans have been pumping into the atmosphere and dumping on the ground and into the waterways in increasing levels since the industrial revolution.

If there’s a lesson to be learned (and there will be many, when all is said and done), it may be that a deadly and catastrophic pandemic has, in just a few months, noticeably curbed our contribution to climate change.

Let me be clear—a global pandemic is not the path to a sustainable future. But the current crisis has helped shed light on the herculean effort needed to turn the tide if we hope to save our planet for future generations.

Climate change

There are countless ways the current crisis has led to a significant reduction in the emission of greenhouse gasses.

Travel of all kinds has come to a standstill. Very few people are driving to work—or anywhere—right now. Nonessential businesses have closed, and those who can work from home are doing so. Conferences have been canceled. Business trips have been postponed. Vacations have been put on hold. And for the time being, there are no concerts, sporting events, in-person weddings or graduations to attend. According to the Intergovernmental Panel on Climate Change, transportation was responsible for 14% of all global carbon emissions in 2014.

See also: COVID-19: Stark Choices Amid Structural Change  

In addition, power plants and factories in China and around the globe have reduced output. Millions are now wearing face masks in public to avoid contracting or spreading the virus. Ironically, the threat of COVID-19 means they’re also breathing cleaner air when they venture outside.

It’s not just cleaner air; even the water is cleaner in some parts of the world. In Venice, locals say the water in the city’s canals has never been clearer, due to the dramatic drop in tourists.

Future of work

The current pandemic has done nothing less than create a worldwide work-at-home experiment.

Normally, when we talk about the future of work, or work sustainability, we talk about reskilling and preparing today’s workers for tomorrow’s jobs.

But overnight, millions of employees who commuted daily to offices or traveled for sales jobs were forced to stay at home and continue working. For many white-collar employees, their work experience may never again be the same when the health crisis is over.

Companies that provide collaborative technology, like videoconferencing, will benefit from the evolution of work life. Ultimately, that’s good news for the planet and those on the front lines of the climate change battle. Working from home requires less travel, less paper usage and less heating and cooling of office buildings.

For those employees who can best manage their time working in isolation, the hours that used to be spent stuck in traffic can now be applied to personal endeavors, like physical fitness, hobbies or family gatherings. Still, others will struggle with knowing when to shut down their computers and stop working. As such, employers will need to keep their remote workers engaged and ensure they don’t feel isolated or unappreciated.

Many companies, like Zurich, have already introduced flexible work schedules, allowing employees to work out of the office some days or adjust their hours to accommodate their personal lives. These companies are ahead of the curve, and their early action is paying off now.

Digital safety

In today’s digital world, trust depends on cyber security and data stewardship. Many businesses today need to collect customer data to provide goods and services. Protecting that data is important to maintain trust.

Since the spread of COVID-19 was declared a pandemic, there has been a dramatic increase in the number of coronavirus-themed cyber attacks. According to cyber security firm CYE, cybercriminals have been increasingly exploiting the new situation caused by the global pandemic, citing a fivefold increase in cases.

At Zurich, we promise to never sell our customers’ personal data or share it without being transparent about it, and to keep it safe and secure as we put it to work so we can deliver better services. Other companies have made similar promises, but with so many employees working from home on networks that may not be as secure as those in the office, it is becoming harder to protect data.

Remote work on the scale we’re experiencing now heightens digital perils like never before. For financial, healthcare and other businesses, as well as federal and state agencies that deal with sensitive data, there’s little room for cracks in cyber security systems.

There is an increased likelihood of employees using unsecure networks to retrieve sensitive information when working from home or in remote locations. As quarantines become more prevalent and more people are authorized to work remotely, businesses will need to ensure they’re maintaining proper controls to protect customer data.

See also: 10 Moments of Truth From COVID-19  

ESG investing

Environmental, social and governance (ESG) is at the core of how Zurich interacts with its customers, brokers and communities at large, and is also reflected in our portfolio management. We work with stakeholders to ensure responsible and sustainable business practices and to protect reputations while promoting best practices in managing ESG risks. While global financial markets whiplash from daily record gains and to record losses, ESG investing is playing the long game.

Investing in ESG funds is on the rise, according to Morningstar. The Wall Street Journal reports that the coronavirus outbreak has given rise to a number of factors that are important to ESG investors, including disaster preparedness, continuity planning and the treatment of employees through benefits such as paid sick leave and work flexibility.

Sustainability

For many, “sustainability” is the catch phrase of our time. For Zurich, the time is now to stand behind the promises we’ve made to support a sustainable future for our business, our customers and our communities.

In 2019, Zurich signed up as the first insurer to the Business Ambition for 1.5°C Pledge, which is aimed at limiting average global temperature increases to 1.5°C above pre-industrial levels by 2030. We’ve also committed to using 100% renewable power in all global operations by the end of 2022.

In addition, we are preparing today’s workers for the challenges of tomorrow, protecting the personal data our customers entrust with us, and investing in businesses that make the world a better place to live.

Will COVID-19 Give Telematics New Life?

Over the past several weeks, there have been numerous aerial photos of some of the nation’s largest highway systems – devoid of vehicles. The sight of tens of miles of ramps, junctions and straightaways with no visible cars is startling, almost a made-for-Hollywood view. But COVID-19 has taken a huge percentage of people out of their vehicles, leaving their cars idle in driveways and garages. Given that vehicle usage is a fundamental and historical rating factor – a predictor of accident frequency – one could conjecture that telematics might be heading toward a new and shining position within the industry.

There are several points for insurers to consider.

  • A huge percentage of businesses that have never had a home-based workforce have been compelled to have one due to stay-at-home advisories. Published interviews indicate that company executives across all industries believe the experience with COVID-19 will change the nature of work even faster than anticipated. More workers will be home-based either permanently or part-time. Will a greater percentage of consumers see the value of usage-based, telematics-driven insurance, given that their vehicles will be idle for greater periods? Insurers need to be prepared for this outcome.
  • Insurers that have yet to commit to telematics programs may well be feeling the strain of not doing so. Many of the largest auto insurers have announced they will refund portions of automobile premiums due to the precipitous decline in miles driven. In particular, Allstate knows, through its telematics programs, that driving has declined by 35% to 50% in terms of miles. This makes the company’s refund program much more fact-based. Clearly, there is significant customer goodwill value in making refunds voluntarily. But what if regulators require insurers to do this across the board? Without telematics data, determining refunds is much more of a guess. And no insurer likes guessing. For the long term, telematics data can facilitate a smooth communication process between insurers and regulators on a number of levels, and this is a good thing.
  • From a claims perspective, adjusting losses in a time where staying home is the norm is a huge challenge. There are a number of technologies that insurers are using to compensate, most prominently DIY photo-estimating. In some cases, insurers are rolling out technologies that were in limited tests to cover the gap in face-to-face adjusting practices. However, sophisticated telematics devices can detect crash damage and relay crash information automatically, eliminating the DIY step and improving accuracy. While there is a fervent hope that we never again have to self-quarantine due to a pandemic, there is significant value in getting sensor-based, telematics crash information directly from point of impact.

See also: 10 Moments of Truth From COVID-19  

To date, telematics adoption has settled in as a segment. Projections that telematics would be the dominant base for all auto programs have not materialized. There are many reasons, but maybe the COVID-19 pandemic will be the impetus that consumers and insurers need to up adoption rates. In the not-too-distant future, the highways will again fill up with more than medical professionals, first responders and retail workers. Why waste the opportunity to use actual data to improve insurance outcomes? Telematics can make the connections!

Business Continuity During COVID-19

Potential business disruptions are part of a company’s regular continuity plan. Still, few were prepared for the impact of a global pandemic that has shut down businesses around the world. Many companies have faced challenging decisions like laying off or furloughing employees for an extended period, while others have had to shift to a fully remote workforce quickly. 

Four leading CEOs in our industry joined us for our special edition Out Front Ideas COVID-19 Briefing Webinar Series to discuss the challenges their businesses are facing and how they are adapting: 

  • Keith Newton – CEO of Concentra
  • Dave North – CEO of Sedgwick
  • Tom Warsop – CEO of One Call
  • Mark Wilhelm – CEO of Safety National

The Carrier Perspective

The insurance companies are facing an onslaught of regulators seeking a myriad of information. Carriers are inundated with data requests, receiving hundreds of bulletins and directives covering most territories, states and Canada. Some states have issued moratoriums on cancellations for non-payments of premiums, while others have requested that carriers make it clear to the public how they will treat premium leniency. Carriers are being asked to provide a COVID-19 readiness plan, including the impact on the business, both operationally and the impact on investment income. The National Association of Insurance Commissioners (NAIC) has stepped in, asking states to pause on data requests, so carriers can focus on servicing their insureds.

Regulators and legislators are seeking to expand the compensability of claims beyond what was planned during the  underwriting and pricing phases. Many legistlators are passing laws stating that COVID-19 claims are presumptions, especially for healthcare workers and first responders, meaning it is presumed they contracted the virus while on the job and it should be covered accordingly. Some states are even looking to expand this to all essential workers. 

As far as the financial impact on carriers, there are a few items to consider. Carriers could see a decrease in premiums due to employer payrolls decreasing. There are also credit risks due to non-payments on premiums, and there may be portfolio devaluations in the future due to lowered interest rates. However, with specific industries, like healthcare, seeing more claims, many sectors will see a decrease in claims because of shelter-in-place enforcements.

The Third-Party Administrator (TPA) Perspective

Initially, TPAs saw a surge in paid leaves in the U.S., but that has now shifted to unpaid leaves because of the programs that employers have in place. With federal programs, like paid leave extensions, being evaluated, we do not yet know the direct impact they will have on injured workers. It may mean shifting an injured worker off workers’ compensation and on to one of those programs in the future if it is more beneficial.

Many employers are reaching out for planning for a future catastrophe. For example, if a natural disaster like a hurricane or tornado occurred during this time (a “cat” within a “cat”), employers want to know that their business would have a continuity plan in place. Everyone is considering the “what-if” scenarios right now, so many are overly preparing for the next big event. 

See also: Keeping Businesses Going in a Crisis  

In the workers’ compensation industry, there has been a drastic decrease in the number of new claims due to some businesses shutting down completely. However, some industries are growing significantly in the current state of the economy, which is noticeable with a more-diversified customer base. Pending claims in workers’ compensation have not seen the same drastic decrease, meaning the injured workers who received our attention before COVID-19 still need assistance, but now are less likely to obtain the care they need. Some patients have no idea how the change will affect their recovery or return to work.  

Due to the pent-up demand for healthcare during the COVID-19 crisis, there will be a backlog of post-pandemic patient needs. This demand may put injured workers at a disadvantage because elective surgeries will not be prioritized above other significant needs like trauma surgeries. Actuaries will have to learn how to adjust to this uncontrollable shift. For example, will a lack of litigation be considered a trend, or will litigation rebound based on the high consumption of healthcare upon a return to normalcy?

There is a balance right now of taking care of the injured workers’ needs and also maintaining communication with them. As a workforce, all partners should be ready to embrace the injured workers when the industry returns to normal, readying resources and preparing to handle the increase of needs.

The Ancillary Program Provider Perspective

The most considerable impact has been an unwillingness for injured workers to get the treatment they need because of COVID-19 risks. Because patients do not want to come into contact with others, the frequency of demand is affected and delays their care. Provider access has also seen an impact. While most are still accessible, industries like dentistry have been advised not to continue treatment. The extension of telehealth has also made accessibility to care much better. 

Referrals for ancillary services have decreased significantly. Specifically, transportation service requests are suffering, but well-established services like home health do not see the same drop in requests. Some ancillary program providers are seeing furloughs of their workforce due to a decline in demand. Some companies are providing advanced paid time off and healthcare coverage for furloughed employees. 

Expect new operating models to emerge from this crisis. There will most likely be a significant increase in remote work employees, now that work from home opportunities have proven to be an adaptable method. The issues surrounding telemedicine use will likely not disappear after this crisis, now that there is a sustained demand for it. Rescheduling technology will also change due to the current number of requests. Shifting to a text-based rescheduling program has seen a much higher response rate from injured employees due to its ease of use, potentially guaranteeing future care for those who cannot currently access it.

The Occupational Health Provider Perspective

Because the occupational health workforce is patient-facing, at occupational medicine centers, employer worksites and primary care facilities, the industry is facing many challenges. These challenges include regulatory directives, limited personal protective equipment (PPE) for front-line healthcare providers and a significant drop in patient volume. However, the industry has dealt with a substantial reduction in patient volume before. During the 2008 recession, there was a significant decrease, but demand rebounded over the months following.

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

Opportunities have developed from the crisis, including testing assistance and telehealth expansion. While limitations on PPE do not allow for occupational health employees to run testing for COVID-19, they are instead managing fit tests for the frontline providers, like those working the drive-through testing sites, to make sure their gear fits properly. Telehealth has provided an incredible opportunity for occupational health providers to expand their services for injured workers. Many providers that were not interested before have now been working quickly through an approval process, so their patients can receive the care they need. However, most occupational health practices are still open for business, but, to reduce exposure, they have reduced hours and staff in facilities.

While most of the industries within workers’ compensation had the ability to move to a fully remote workforce, declines in patient volume and referrals have forced some to furlough employees until there is a rebound. This crisis has forced all our CEOs to use disaster task forces within their organizations and learn how to readily adapt to changes in their businesses, both financially and operationally. COVID-19 will certainly breed many advances in patient care and opportunities for growth in the workers’ compensation industry, as all of our CEOs are continuously learning from the experiences this has created. 

To listen to the full Out Front Ideas with Kimberly and Mark webinar on this topic, click here. Stay tuned for more from the Out Front Ideas COVID-19 Briefing Webinar Series, every Tuesday in April. View the full list of coming topics here.

Cloud Computing Wins in COVID-19 World

Through the countless discussions that have occurred these past two weeks with many insurers, there have been winning strategies that have shone through as insurers have been executing their business continuity plans. And there have been certain challenges on the other side. Were you a company that needed the support of people to be in the office to “load the tapes,” making sure all those batch jobs on the mainframe computer kept running? Did you have challenges making applications available to your now-remote workforce? Were your call centers still able to fully support agents and policyholders?

One of the greatest successes in this market has been the performance of cloud computing. I remember, back in 2012, discussing the advantages of cloud computing. As an industry, there was just experimental acceptance of this capability – usually relegated to sandbox environments and testing. Jump forward to 2020 – and we see that 84% of all core system buying transactions were cloud-based. Not only have we leapt forward in our use of cloud, but we are now in mainstream acceptance that core systems – some of the most critical systems in the enterprise – are being commonly deployed in the cloud.

Let’s consider for a moment some of the advantages of systems that are deployed in the cloud – just to name a few that have been experienced over the past two weeks:

  • Cloud provides a virtual computing environment that also enables virtualized managed services.
  • New environments can be created to dynamically test changes.  
  • Access is available – for all that need to use the applications regardless of physical location.
  • Cloud decreases the need for “onsite” resources – elimination of tape loads, etc.

Investments that insurers continue to make to transform their organizations are bearing fruit today (even though we do not want to have to go through a pandemic to realize this truth). The digitally enabled experiences that insurers are providing to their customers and distribution partners are critical. Never before has it been more important to provide full transparency to the customer. For some, you are experiencing the world as it was before COVID-19 – a world of transformation that was moving forward, understanding the importance of the digital experience, and looking at ways to provide these capabilities. Today we are in a state where these digital experiences are a reality.

See also: Will COVID-19 Disrupt Insurtech?  

If the events of the past few weeks find you considering cloud deployment for your applications moving forward, refer to our recent research report, Cloud and Core Systems: Top 10 Strategic Considerations, for insights on buying cloud-deployed software solutions. Cloud will be one of the levers that insurers can use to meet the digital mandate that is no longer for the future – but is here today.