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The Impact of COVID-19 on P&C Insurance Industry: Top 4 Factors

By August 31, 2020February 27th, 2024No Comments

The novel virus, COVID-19, has made an impact on nearly every corner of the world and continues to deeply affect portions of the US economy.

In Q2 of 2020, the US experienced a -9.5% drop in real GDP and a -12.6% drop in consumer spending. Hospitality, travel, restaurants, manufacturing and construction are the top business sectors affected today as Americans are forced to stay home and socially distance.

P&C insurance is indirectly affected by business closures due to unemployment numbers and less automobile travel, among several factors. We’ve broken down the effects of COVID-19 into four main categories.

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1. P&C Operations & COVID-19

Technology has never been more important to today’s modern workforce, and the insurance industry is set on a path for dramatic efficiencies.

With market changes in store for P&C insurance, the need for cloud-based hosting, advanced third-party integrations, accessible customer service and dynamic reporting is critical to staying competitive.

Telecommuting is likely to remain through to 2021. Kate Lister, President of Global Workplace Analytics, estimates 25-30% of the workforce will be working from home multiple days a week by the end of 2021. Many areas of the insurance industry are likely to follow this trend and will rely on adaptable P&C Insurance Solutions for keeping employees unified in one cloud-based ecosystem.

Back office administration and mail room support has a stronger likelihood this year for carriers to outsource. Business Process Outsourcing (BPO) is among WaterStreet Company’s core services for relieving carriers of administrative burdens.

2. Homeowners Insurance & COVID-19

As close to 30% of Americans couldn’t afford their housing payments in June and July, Bank Rate points out many of the leniencies applied to homeowners covers mortgages but not always home insurance. California is one state to impose a 60-day grace period on insurance payments.

Insurers may be able to reassess the insured’s insurance costs based on their change in risk. Remaining at home reduces the risk of a break in, but also increases risks associated with working at home, such as more high-value electronics in the home.

Carriers and MGAs must determine the right questions to ask policyholders for updating policy details and currently have the opportunity to craft new offerings for those working from home. A few questions to consider:

  • Has the home been improved with security measures, such as cameras recording the premises or other smart devices, such as smart locks, smart thermostats or smart smoke alarms?
  • Is the home no longer used as a rental or AirBnB?
  • Is there any other coverage no longer needed due to lifestyle changes and home use according to the current policy details?

Enabling self-inspections is a very popular trend for home insurers to prevent inspectors from visiting homes during the pandemic. WaterStreet Company works with Livegenic for enabling the insured to send images and video directly to the insurer’s system. Our solution is able to integrate with any number of third-party solutions thanks to our robust API.

3. Auto Insurance & COVID-19

Auto policyholders have an opportunity to reduce coverage on their auto insurance during COVID-19, particularly as insurers offer usage-based coverage and employ telematics data.

Usage-based coverage is currently very appealing to policyholders who do not commute for work. This allows carriers and MGAs to stand out from competitors with lower price rates and new benefits, such as rewards for safe driving. Fewer cars on the road also mean less accidents and few claims, reducing the payout from auto insurance companies during this time.

State Farm is among auto insurance carriers to offer a special relief offering during the peak of the pandemic with a 25% policy credit between March and May 2020.

Retaining auto insurance customers is a high priority during this volatile time period. As policyholders shop around for the best deal, it’s important for insurers to stay aware of ways to reward existing customers and draw in new ones.

4. Travel vs Cyber Insurance & COVID-19

Travel insurance and cyber insurance are two P&C insurance specialties that are seeing a dramatic ebb and flow.

International restrictions currently remain for those traveling to or from the United States. For example, the US Department of State urges those traveling to European countries for non-essential reasons to check with individual consulates in their desired country for travel restrictions.

Travel insurance companies can leverage COVID-19 as a “foreseen event” and not provide coverage on a claim, however, those who have contracted COVID-19 during travel may retain coverage. This is unique for each carrier and must be determined by policy details. In either case, many fewer individuals are traveling, leading to a decline in new policyholders and an increase in claims submitted.

Cyber insurance is on the rise as there’s more demand to protect user privacy online during telecommuting. This especially applies to businesses who are looking to insure their employees working remotely and in high-risk fields if information were to leak. This insurance has had slow growth leading into 2020 as there’s little consumer knowledge about the coverage. However, P&S Intelligence estimates the industry size to grow from $5.6 million in 2019 to $70.7 million by 2030.

The Future of P&C Insurance Systems

Now is the perfect time for carriers and MGAs to transition out of dated legacy systems and consider cloud-based Policy Management Systems.

As customers expect more and competitors gain efficiencies, it’s critical to employ the best tools in the industry to keep up.

Reach out to WaterStreet Company today to request a demo of our solutions.

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