The final quarter of 2020 has finally arrived. After a tumultuous year, many are hoping for more predictable events and optimistic leadership.
As the COVID-19 pandemic continues to affect Americans with over 180,000 new cases in one day this November, the insurance industry faces challenges and opportunities to rebound in a hard market ahead of an unusual winter season.
WaterStreet Company is here to help you keep up with shifting P&C insurance trends.
1. Continued Risk Assessment in a Hard Market
The insurance industry began 2020 in a hard market, which has further hardened through the pandemic. This winter is likely to see continued pressure on insurance companies to more accurately assess risk. Rating by peril and usage-based insurance are two areas of opportunity for coverage that caters to modern policyholders and is priced based on strict coverage limitations.
With uncertainty due to COVID-19 extending into 2021, rate increases and higher premiums are likely possibilities for P&C carriers. According to Willis Towers Watson, property insurance buyers considered catastrophe-exposed with losses could face rate increases of 30% or more. Higher losses due to catastrophes, such as wildfires and hurricanes, are notable as a continued trend into the new year, although this winter season may not necessarily bring severe blizzards.
- The insurance industry continues in a hardening market and requires improved risk assessment.
- Rate increases, higher premiums and more restrictive coverages are likely trends.
- Insurers can benefit from innovative ways to craft coverages, such as rating by peril and usage-based coverage.
3. Reputation Management
This year has revealed gaps in many types of insurance coverages due to the COVID-19 virus. The insurance industry at large must weigh the risks of providing coverage against infectious disease, whether for travel insurance, event insurance, business interruption insurance, or many others. On one hand, pandemics are estimated to occur every 100 years, however the COVID-19 virus has deeply affected our global economy and caused insurers to face a negative impact on reputation for lacking coverage.
Policyholders are faced with their own economic strain through the pandemic, leading many to review their home and auto coverage for cost savings. Insurers should consider strategies to enhance customer loyalty with better marketing, communication and incentives, such as special rewards and safe driving perks.
- The insurance industry at large faces a reputation crisis due to losses not covered from COVID-19.
- Insurers must weigh whether to cover or exclude infectious disease in the future for a wide range of coverages.
- Insurers must focus on retaining existing customers by prioritizing loyalty and retention.
3. Regional Outlooks for Winter Storms
The winter 2020 season brings an ongoing moderate to strong El Niña. This weather pattern causes colder than average sea surface temperatures across the Pacific equator, blowing cold winds over the most northern states for possible snowy conditions.
El Niña combined with other factors is predicted to cause colder, wetter than average temperatures in the northern United States and warmer, dryer than average temperatures in the southern United States. A continued drought is very likely to occur in the western United States as 45% of the continental US is currently experiencing drought with warm, dry winds incoming.
Many weather agencies are predicting a divided season between north and south as well as a bookended winter. Harsher conditions are likely to occur at the beginning and end of the season with mild conditions in between.
- Northern and southern states are likely to experience very different weather patterns this winter.
- Wet, snowy conditions are most likely for north-western states as well as states surrounding the Great Lakes while drought will continue for many western states.
- The season is predicted to be harshest at the beginning and end.
Reach out to WaterStreet Company today to request a consultation and demo.