• The impact of the unprecedented pandemic on global insurance markets is unequivocally displayed via capital market volatility, asset risk estimations, and significantly weak premium growth aspects.
  • COVID-19 related losses- including event termination and business interruption, are expected to be ‘picked up’ by a plethora of reinsurers and thus not significantly exacerbate the performance of primary insurers

Regardless of the size and corporate structure of one’s business, business insurance is an absolute must in the commercial world in order to avoid potential financial ruin.

The Effect of the COVID-19 Pandemic: Reputation Exacerbation

The unprecedented lockdown has led to the introduction of a plethora of life changing restrictions from different governments around the world who have attempted to restrict the disastrous spread of the coronavirus. These restrictions have undeniably led to a plethora of  extremely complicated, dynamic, and unpredictable difficulties for the insurance industry and have undoubtedly significantly exacerbated the industry’s reputation.

The insurance industry was in no way known for its exemplary customer reputation to begin with, but the pandemic has undeniably shed light to a plethora of business exclusion clauses- such as in the case of business cancellations and travel restrictions, which most customers were not really aware of and has arguably exacerbated the already poor reputation of the industry.

This is evident in recent reports which have revealed that approximately 66% of market-based brokers believe that their industry’s reputation has been irreversibly changed for the worse as a result of the pandemic. This is not too surprising, especially when considering the prolific amount of confusion and unpredictability that is associated with industry’s policies during these unprecedented times of hardship and monetary ruin.

A primary source of the unreliability and confusion that is associated with the business insurance industry can be unequivocally illustrated by a quick consideration of the events of the cancelled Summer Olympics of 2020- which saw a plethora of persons discovering that evidently their cancellations were covered but not their postponements.

The Effects of a Proliferated Remote Workforce

Given the prolonged effects of the pandemic, the increased business insurance claims are likely an indication of the increased exposure of a  significant proportion of the workforce- who are now primarily working remotely. Due to the aforementioned restrictive measures that have been imposed as a result of the COVID-19 pandemic, the business insurance market has undeniably seen its rates significantly increase.

The changes in various market-related protocols and incidence response preparedness has led to a plethora of underwriters asking detailed questions in relation to various business activities and practices- especially in relation to claims. As the downtimes of ransomware continue to significantly expand, carriers are experiencing a rapid change in business behaviour which has led to them requiring both: a) increased information in relation to patching, and  b) increasing information in relation to backups and downtimes.

Market specialists have indicated that the sector should likely expect to see a significant expansion in relation to the number of underwriter-related scrutiny-  particularly in cases of disaster recovery, external vulnerability reports, and response planning related claims.

Employment Law and its Effect on the Insurance Industry

Currently, employment law and its relative legislation effectively means that laying individuals off work or requiring them to work remotely can create a plethora of legally contentious issues in relation to work-based discrimination, invasion of privacy and retaliation.

On the other hand, requiring or asking individuals to resume work during the COVID-19 pandemic can easily be considered as a workplace safety hazard- leaving employers to choose between two inconvenient options which are both pragmatically unfavourable.

Some industries- such as retail and hospitality, are also seeing significantly increased retention rates by carriers which has unsurprisingly led to the mandatement of COVID-19 related employment exclusions and the cutting of workforce capacity.

Moreover, practically all industries have seen carriers electing to require: a) significantly more detail in relation to the quality of the underwriting information they receive- leading to the regular exclusion of most new and starting businesses, and  b) updated diversity policies which account for the aforementioned legally contentious issues in an employment setting.

Final Take

As touched on above, the insurance industry has undoubtedly seen better days- especially in relation to their reputation and their ability to accurately predict market trends and make corporate decisions accordingly.

Nevertheless, it should be duly noted that a smart, robust business insurance plan remains an absolute prerequisite for all business owners, as it is arguably the only tool that can effectively protect their businesses from complete financial ruin in times of unprecedented or unpredictable disastrous events.

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