Pandemic-proofing: Insurance may never be the same again
Send a link to a friend
[July 10, 2020] By
Noor Zainab Hussain
(Reuters) - Insurers are creating products
for a world where virus outbreaks could become the new normal after many
businesses were left out in the cold during the COVID-19 crisis.
While new pandemic-proof policies might not be cheap, they offer
businesses from restaurants to film production companies to e-commerce
retailers ways of insuring against disruptions and losses if another
virus strikes.
The providers include big insurers and brokers adding new products to
existing coverage, as well as niche players that see an opportunity in
filling the void left by mainstream firms that categorize virus
outbreaks like wars or nuclear explosions.
Tech firm Machine Cover, for example, aims to offer policies next year
that would give relief during lockdowns. Using apps and other data
sources, the Boston-based company measures traffic levels around
businesses such as restaurants, department stores, hairdressers and car
dealers.
If traffic drops below a certain level, it pays out, whatever the
reason.
"This is the type of coverage which ... businesses thought they had paid
for when they bought their current business interruption policies before
the coronavirus pandemic," the company's founder Inder-Jeet Gujral told
Reuters.
"I believe this will be a major opportunity because post-COVID, it would
be as irresponsible to not buy insurance against pandemics as it would
be to not buy insurance against fire."
The company is backed by insurer Hiscox and individual investors, mostly
from the insurance and private equity world.
Restaurants in Florida's Miami-Dade County, where Mayor Carlos Gimenez
on Monday ordered dining to shut down soon after reopening, are now
reeling, said Andrew Giambarba, a broker for Insurance Office of America
in Doral, Florida.
"It's been like they made it to the ninth round of the fight and were
holding on when this punch came out of nowhere," said Giambarba, whose
clients include restaurants that did not get payouts under their
business interruption coverage.
"Every niche that is dealing with insurance that is affected by business
interruption needs every new product they can have."
FILLING THE VOID
Pandemic exemptions have helped some insurers emerge relatively
unscathed and the sector has largely resisted pressure to provide more
virus cover. Indeed, some insurers that paid out for event cancellations
and other losses have removed pandemics from their coverage.
British risk managers association Airmic said last week that the
pandemic had contributed to a lack of adequate insurance at an
affordable price and most of its members were looking at other ways to
reduce risk.
To help fill the void in a locked-down world, Lloyd's of London insurer
Beazley Plc <BEZG.L>, started selling a contingency policy last month to
insure organisers of streamed music, cultural and business events
against technical glitches.
"These events are completely reliant on the technology working and a
failure can be financially crippling," said Mark Symons, contingency
underwriter at Beazley.
Marsh, the world's biggest insurance broker, has teamed up with AXA XL,
part of France's AXA <AXAF.PA>, and data firm Arity, which is part of
Allstate, to help businesses such as U.S. supermarket chains,
restaurants and e-commerce retailers cope with the challenges of social
distancing.
[to top of second column] |
Waiters at a restaurant adjust social distancing screens outside for
outdoor seating seating that follows current health guidelines to
slow the spread of Coronavirus (COVID-19) at a restaurant in New
York City, New York, U.S., June 25, 2020. REUTERS/Lucas Jackson/File
Photo
With home deliveries surging, firms have hired individual drivers to meet
demand, but commercial auto liability insurance for "gig" contractors with their
own vehicles is hard to find.
Marsh and its partners devised a policy based on usage with a price-by-mile
insurance, which can be cheaper than typical commercial auto cover as delivering
a pizza doesn't have the same risks as driving people around.
"Even when the pandemic is over, we believe last-mile delivery will continue to
grow," said Robert Bauer, head of Marsh's U.S. sharing economy and mobility
practice.
A report by consultants Capgemini showed that demand for usage-based insurance
has skyrocketed since COVID-19 first broke out and more than 50% of the
customers it surveyed wanted it.
However, only half of the insurers interviewed by Capgemini for its World
Insurance Report said they offered it.
BESPOKE COVER
Since businesses are only now learning how outbreaks can affect them, some new
products are effectively custom-made.
Elite Risk Insurance in Newport Beach, California, has been offering "COVID
outbreak relapse coverage" since May for businesses forced to shut down a second
time, its founder Jeff Kleid said.
The policies are crafted around specific businesses and only pay out when
certain conditions are met, Kleid said.
For film and television production companies that could be when a cast member
contracts the virus, forcing them to stop shooting. Another client, which raises
livestock for restaurants, is covered for a scenario in which it would be
impossible to get animal feed.
Such policies do not come cheap. A $1 million policy could cost between about
$80,000 to $100,000 depending on the terms.
"The insurance ... is costly because it covers a risk that does not have a
historical basis for calculating the price," Kleid says.
And in March, when COVID-19 ravaged northern Italy, Generali's <GASI.MI> Europ
Assistance offered medical help, financial support and teleconsultations for
sufferers when discharged from hospital, on top of regular health insurance.
It sold 1.5 million policies in just two weeks and now has 3 million customers
in Europe and United States.
Some insurers are also working on changes to employee compensation and health
insurance schemes. With millions of workers not expected to return to offices
anytime soon, some large insurers in Asia are preparing coverage to account for
that, according to people familiar with those efforts.
At least one Japanese insurer has started work on a product to cover employees
for injury while working at home, they said.
"Working from home will be the new normal for years to come. That would make the
scope of the employee compensation scheme meaningless if a person suffers an
injury while at home," said a Hong Kong-based senior executive at a European
insurer.
(Reporting by Noor Zainab Hussain in Bengaluru, Suzanne Barlyn in Washington
Crossing, Pennsylvania, Carolyn Cohn in London and Sumeet Chatterjee in Hong
Kong; Additional reporting by Muvija M; Editing by Tomasz Janowski and David
Clarke)
[© 2020 Thomson Reuters. All rights
reserved.] Copyright 2020 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content. |