Property casualty insurance is an interesting beast. Whereas life, health and pension are defined by what they cover, P&C – as a label – scarcely does justice to its scope. At a moment like this, it seems more fitting to apply the more apt, if nebulous, term “general insurance” to consider how actuarial practice will be impacted by the COVID-19 pandemic. Is there any aspect of our lives which has been untouched by the disease raging through every country on earth? And where lives, technologies and societies are affected, where risk changes, actuaries are present.
I’ve written a short brief about the potential impacts of COVID-19 on the P&C industry. This is by no means the final word. Our hope is that it starts the conversation about what might happen next. There are a number of questions that the profession will face in the coming months and years. Among them:
· To what extent, if any, was this risk underpriced?
· Given the dramatic cessation of economic activity, what lines may have been overpriced? Was such a scenario foreseeable?
· How will ratemaking models respond to the changes in coverage wording that will undoubtedly appear in the future?
· How can actuaries assist in the development of viable coverages to meet new demand in the market?
· Do actuaries have any advice about communication of risk and how best to mitigate it?
For those interested in exploring and modeling data, we’ve created a GitHub repository which has scripts to pull some of the publicly available COVID-19 statistics. That may be found here: https://github.com/casact/covid_19_data.
Please consider using the comments section on this page to share your thoughts. As always, feel free to reach out to me directly at firstname.lastname@example.org if you have any ideas or questions about how the CAS can best serve its members and the public at large.
Thanks for sharing this.
How about Directors & Officers Liability? Would this cover making unwise business decisions about keeping a business open too long?
I’m not a D&O expert, but I have seen at least a few companies revise earnings projections for the year. That’s prudent management, but also a way to get in front of potentially angry shareholders.
The Workers Comp and the Homeowners examples of potential liability need to consider the burden of proof required. With the flu, it is nearly impossible to definitively state the location of exposure that caused the disease. Covid-19 should be similar. This would not be an issue for a cruise boat at sea, but will be for most workers at most businesses and for visitors to a personal residence.
Another factor to consider is demographics. Most of the worst cases are from the elderly. These people are not covered by Workers Comp, but may be in isolated locations where it is probably clear as to where they were exposed. Therefore I would expect nursing homes to be particularly vulnerable to lawsuits.
Agreed that attribution of infection is a difficult one. However, that difficulty may not be seen as an obstacle for a plaintiff’s attorney and defense costs will still be present. There have been isolated cases of “pandemic parties” where some attendees were later confirmed to be infected.