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The severity of the COVID-19 pandemic as an economic loss event is unprecedented for companies and insurers alike and claims trends, and risk exposures are prone to alter in both the mid-and long-term as a result.
With the reduction in economic activity during lockdown phases, typical property and liability claims have been subdued, most notably in the aviation and cargo sector and many other industries with fewer accidents reported. The coronavirus outbreak has reduced risk in some areas while, at the same time, changing and increased risk in others. The pandemic-induced and hastened changes in society and industry are anticipated to have a long-term influence on claims patterns and loss trends in the corporate insurance sector. There is still the potential for claims to occur as factories and businesses restart after periods of hibernation and given the longer development patterns for third-party claims in casualty lines.
Some claimants and plaintiffs have been more inclined to negotiating settlements outside of court rather than waiting a long time for their case to be scheduled – a pattern that was also highlighted in another recent claim – and this tendency is expected to continue as economic activity picks up. Claims filings from motor accidents, slips, falls, or workplace injuries slowed as more people stayed at home and with the closure of many shops, airports, and businesses during lockdowns across the world.
Impact Of the Pandemic on Claims Trends in Different Lines of Insurance
Interruption of property or business
Covid-19 did not affect property damage claims since loss drivers such as weather are not connected. However, once manufacturing lines resume, the potential of machinery breakdown and damage, fire and explosion, will increase.
Furthermore, with fewer employees, on-site, inspections and maintenance may be delayed, or loss situations such as a fire or water escape may go unnoticed, resulting in greater damage.
Meanwhile, as more people work from home, businesses may have fewer physical assets and fewer employees on-site in the future, resulting in changes in workers’ compensation and cyber risks. Cyber risk exposures have increased throughout the epidemic, with allegations of increased ransomware and business email hack attacks, where the main reason being people are pushed or forced to work from home and online engagements have increased in numbers.
The aviation industry has reported few claims directly related to the pandemic to date. A few passengers have filed lawsuits against airlines over flight cancellations or delays. Slip and fall accidents at airports, which were once one of the most common causes of aviation claims, have decreased in frequency.
Long-term claims trends
Covid-19 is accelerating many trends, such as a growing reliance on technology and raising awareness of the vulnerabilities of complex global supply chains. Many organizations are expected to assess and de-risk their supply networks in the future and build more resilience.
Due to the pandemic’s interruption, this may entail some reshoring of vital production regions. Such a move would likely impact the frequency of claims and the costs of any future business interruptions.
Digital claims handling
A few years ago, claims processes were mostly manual, and paper-based and many people could not have imagined handling claims remotely, but today technology plays a key role. The need for digitalization of claims handling has also been highlighted by Covid-19. Through satellite, drone, or picture capture technologies and applications like Mirror Me, remote claims inspections and evaluations for tornadoes, floods, or significant industry accidents are now conceivable.
Although liability claims are typically long-tail with a lag in reporting, general liability and workers’ compensation claims may yet materialize. Also, Insolvencies, as well as event-driven litigation, could be potential sources of claims. There have only been a few securities class action cases relating to Covid-19 in the world so far. However, regardless of whether Covid19 or any other Natural or Human disaster, should situations lead us to continue facing challenges.
We here at Informatics are always available to assist with your insurance software needs and we understand and emphasize the importance of a culture fit and better collaboration and provide appropriate solutions for move forward. We provide end-to-end software solutions and systems for insurance companies, helping them provide timely, customer-centric decisions. We also specialize in banking software and infrastructure solutions. Contact us today for inquiries!
Written by Siththy Waseema