The global outbreak of COVID-19 has quickly escalated in both size and scope, with the ongoing spread of the coronavirus impacting millions of lives and the accompanying lockdowns significantly impacting the world’s economies.  These events have implications for general insurers on multiple fronts given the wide variety of coverage they offer and the operational implications from underwriting and claims processes.

The impacts on general insurers differ by class of business and need to be considered across pricing, underwriting, claims management and reserving.

For pricing and underwriting:

Insurer considerations around new pricing may result either in premium reductions for some classes given lower levels of human activity, or in higher premiums, given the economic conditions are triggering higher claim levels.

• Vulnerable customers: Insurers need to review policy and exclusion wording as well as their policyholder interaction processes to ensure that vulnerable customers are not being disadvantaged in the current difficult times.
• Operationally: Further consideration needs to be given to premium volumes from classes with variable premium adjustments. For example, premiums tied to business turnover levels, employee wages, business written volumes or claims measures, to ensure that the insurer has appropriate premium levels on their books.

For claims management and reserving:

The lockdowns and physical distancing rules are creating distinct patterns of slower claims reporting, slowing down the claims assessment processes, and creating difficulty in getting expert reports, such as engineering reports for construction and commercial property or expert medical reports for WC and CTP. They are also resulting in lower court and lawyer activity, a decline in recoveries or subrogation and a potential rise in gratuitous payments.  

• Lower or deferred claims: These claims developments will ultimately result in either lower claims, for example less cars on the road resulting in lower claim frequencies for motor property damage and lower claim frequencies for bodily injury; or in a deferral of claims reporting and payments to a later date, e.g. legitimate claims reporting being delayed with policyholders deferring claims reporting while coping with the impacts of COVID-19 on their day-to-day lives, or with claims assessors not being able to perform their duties. 
• Business class differences: The claims impacts, whether direct or indirect, will differ by class of business, and actuaries will need to consider these impacts when reserving for the 31 March and future reporting balance dates.

In our next blog we will set out some claims and reserving considerations by class of business.