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Insurance has ‘never experienced’ something like COVID-19

Businesses generally don’t have coverage for these circumstances

Like many businesses, insurance companies are facing unique challenges during the coronavirus pandemic.

The staffs of companies are working remotely and getting responses has not been as easy as before.

“We are traditionally face-to-face where we do selling. We use more of an educational approach with our clients. It is easier to do face-to-face. Our company has moved more toward telesales,” said Maria Fowler, agency manager for Baltimore Life Insurance Co., Duncansville.

The industry is continuing to serve policyholders and write new business, said April Ressler, president of Teeter Group, Altoona.

“Consumers are becoming more self-sufficient using online/web-based services/mobile apps to pay bills, view ID cards and request certificates,” Ressler said. “Many carriers are offering credits to offset the reduced use of vehicles — both personal and business, as well as other credits to other industries and many insurance carriers also offering delayed premium payments, delayed cancellations for non-payment to help policyholders through these challenging times.”

John H. Eichelberger Jr., owner of Complete Insurance Services, Inc., Altoona, said the new system is “functioning.”

“Many insureds are without work and are having a difficult time making premium payments, so the companies have been good about waiving late fees, offering discounts or rebates, stopping cancellations and working with insureds to stretch out payment plans,” he said. “Many commercial insureds are looking to cut coverages in order to drive down their premiums. We cut one restaurant customer’s premium by more than half, so that he can keep some coverage in place and manage his bills through a period of significantly reduced income.”

With many businesses closed, receipts and payroll are both down.

“Everyone’s sales are down from last year, that affects payroll,” said President Mark Gingrich of the Warren A. Gingrich Agency, Altoona. “When they do good, we do good. When sales are up, payrolls are up. That is what we base our rates on.”

Businesses generally do not have coverage for a situation like the corona­virus.

Businesses often have business interruption coverage, but that coverage generally applies to “direct physical loss.”

“That is not coming into play in this,” Gingrich said. “That is for fires or wind damage, etc. — when they can not open. It has to be from an actual physical loss. It does not cover something like a virus or government shutdown. There is no coverage for that. The insurance industry has never experienced anything like this before.”

Actions of “Civil Authority” under this situation are not covered and most if not all companies have an exclusion added to their policies for “Loss Due to Virus or Bacteria,” Eichelberger said.

Across the country there is a legislative push to make insurance carriers accept these claims even though coverage is excluded, Ressler said.

“It will be interesting to see the response,” she said. “If carriers are required to pay claims they had not funded to pay, it could significantly impact future insurance costs for everyone. Some are predicting a potential government response to help fund potential future losses like this, like the response following the attacks on 9/11. In Pennsylvania, we have also seen some proposed legislation (HB2386) to provide grants to businesses whose business interruption claims were denied and employ no more than 200 employees.”

The average person cannot insure for losing a job in the open insurance market. This risk is better placed in the social insurance arena, and is, in fact, covered by Unemployment Compensation Insurance, Eichelberger said.

“If an individual contracts the disease and is unable to work due to the illness it is possible their short-term disability coverage would be triggered,” Ressler said. “Workers compensation benefits may also be triggered if individuals contract the disease at work. And Act 17 of 2020, which became law on April 29, provides additional salary protection for police officers in the commonwealth if they should contract COVID-19, essentially granting them heart and lung benefits.”

However, unusual coverages that protect financial loss due to event cancellation are written more often than you might think, Eichelberger said.

“We have provided event cancellation coverage over the years including coverage for one recent event that occurred not long before the government shutdown,” he said. “The certificate of insurance for that event, written by Lloyds of London, provided coverage for the government closure of the event venue due to communicable disease. I’m sure contracts like this have paid for claims around the world over the past couple of months.”

The Wimbledon tennis tournament had the foresight to buy about $1.9 million per year in pandemic insurance following the SARS outbreak in 2003, GlobalData said in a recent bulletin.

Paying out roughly $31.7 million in premiums over that 17-year period, Wimbledon is set to receive an insurance payout of about $142 million for this year’s cancelled tournament, “making it a very sensible investment,” said Ben Carey-Evans, an insurance analyst at GlobalData, the London-based platform that provides data analytics and expert analysis about the world’s largest industries.

As a result, Carey-Evans said, Wimbledon is “one step ahead of most businesses by having insurance in place for current events.”

“Reputable sporting events, such as the Premier League and The Open (golf tournament), have been canceled or postponed, causing the organizers to lose a lot of their investment,” he said in a statement.

“This unprecedented disruption to events caused by COVID-19, and the significant payout to Wimbledon will surely see all event organizers around the world look to invest in this product in the future,” Carey-Evans said. “This could see pandemic insurance move from being a niche product to an essential one for sports and music organizers. Insurers will face challenges in pricing premiums due to a sharp rise in popularity and the significant level of risk attached to the product.”

Gingrich said he isn’t sure if people in this area would buy such a policy.

“If it were available here, would anyone buy it? We never had terrorism coverage until after 9/11. People would probably not buy coverage for a government shutdown or a disease,” Gingrich said.

“The insurance industry has already begun to draft policy language to provide coverage to respond to situations like this,” Ressler said. “However, it is not clear if or when carriers will adopt these forms, if or how coverage will be limited or at what premium costs these would be in the future.”

Mirror Staff Writer Walt Frank is at 946-7467.

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