Pandemic is changing insurance claim trends, risk exposures

Claim trends and risk exposures are likely to evolve in both the mid- and long-term as a result of the pandemic.

The Covid-19 pandemic is one of the largest economic loss events in history for companies and insurers alike. However, it’s not only the magnitude of the impact which is unprecedented. Claim trends and risk exposures are likely to evolve in both the mid- and long-term as a result of the pandemic. 

With the reduction in economic activity during lockdown phases, traditional property and liability claims have been subdued, most notably in the aviation and cargo sector, but also in many other industries with fewer accidents at work, on the roads and in public spaces, according to a new report by Allianz Global Corporate & Specialty (AGCS).

“The coronavirus outbreak has reduced risk in some areas while, at the same time, changing and heightening it in others. The wider changes in society and industry brought about and accelerated by the pandemic are likely to have a long-term impact on claims patterns and loss trends in the corporate insurance sector,” says AGCS Chief Claims Officer Thomas Sepp. 

“The growing reliance on technology, shift to remote working, reduction in air travel, expansion of green energy and infrastructure and a rethinking of global supply chains will all shape future loss trends for companies and their insurers.”

Estimates vary, but the insurance industry is currently expected to pay claims related to the pandemic of as much as US$110 billion in 2020, according to Lloyd’s. AGCS alone has reserved about €488mn (US$571 million) for expected Covid-19 related claims, especially for the cancellation of live events and the disruption of movie or film productions in the entertainment industry.

Covid-19 is accelerating many trends such as a growing reliance on technology and rising awareness of the vulnerabilities of complex global supply chains. Going forward, many businesses are expected to review and de-risk their supply chains and build in more resilience. This could involve some reshoring of critical production areas because of disruption caused by the pandemic. Such a move would likely impact frequency of claims and the costs of any future business interruptions.

Meanwhile, the growth of home working means that companies may have lower property assets and fewer employees on site in future, but there would be corresponding changes in workers` compensation and cyber risks. During the pandemic cyber risk exposures have heightened, with reports of the number of ransomware and business email compromise attacks increasing.  To date, AGCS has only seen a small number of cyber claims which are Covid-19 related however.

Covid-19 has also reinforced the need for digitalization of claims handling. Remote claims inspections and assessments for tornados, floods or major industry accidents are now possible through satellite, drone or image capture technology and tools such as MirrorMe. 

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