April 27, 2020 Auto Insurance Trends May Be Affected for a Long Time Due to COVID-19
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April 27, 2020 Auto Insurance Trends May Be Affected for a Long Time Due to COVID-19

by | Apr 27, 2020 | Firm News

COVID-19 will affect insurance claims and premium trends over the next few months and potentially for years to come, analysis from Deloitte says.

The economic and societal shifts experienced during the COVID-19 pandemic will influence rebates, exposure and cost trends, and interpretations of coverage language, Deloitte says.

The pandemic has already increased customer “touchpoints” with insurers and intermediaries at a time when much of the insurance workforce has transitioned to working from home.

“Many policyholders have already been actively requesting premium returns from carriers for reduced exposures,” Deloitte notes.

Car insurance will see “dramatic shifts” in business and Deloitte says COVID-19 “may impact average auto claim costs in both directions.”

Average costs associated with new accidents may decline with less traffic density, although repair costs may rise if replacement part costs escalate from a supply shortage. This may bottleneck when social distancing is lifted and owners begin servicing their vehicles again.

An increase in fatigue-related claims from commercial vehicle operators driving for longer periods may potentially offset some of the expected frequency reductions.

In the longer term, some businesses and individuals may not revert to routines prior to the COVID-19 outbreak. This may suppress miles driven. However, cheaper petrol may increase driving demand.

General liability claims may occur from customers claiming they contracted the coronavirus from premises or products, or while attending insured sponsored gatherings.

“Although such claims may be difficult to prove, general liability insurers may experience an increase in expenses to defend policyholders,” Deloitte says.

Deloitte says it is likely that COVID-19 related Directors and Officers (D&O) claims may arise and insurance companies, at a minimum, will see additional expenses to defend these potential claims.

“History tells us that any event in which a company’s market value decreases could lead to directors and officers (D&O) claims, and the COVID-19 outbreak is likely no different,” Deloitte says.

“The way in which companies respond to these challenges could be the basis of future lawsuits. Were they unnecessarily cautious? Did they not do enough? Did they act too soon, or was their response too slow?”

Deloitte says cyber insurance carriers should be prepared for a potential increase in claims, driven by a higher volume of professionals working from home and unprecedented stress on tools, systems, and infrastructure which may ramp up data breaches, phishing, ransom attacks or other disruptions.

Workers’ compensation insurers are expected to experience loss of premium income as many policyholders reduce their workforce to manage current business needs, a situation observed during prior economic downturns.

Individuals who contract COVID-19 may be eligible for workers’ comp benefits while first responders and healthcare professionals may experience post-traumatic stress disorder from treating COVID-19 patients.