COVID-19 Challenges and the Impact on Your Insurance

FEBRUARY 9, 2021

For businesses affected by COVID-19, recovery can’t come soon enough. Organizations that survived significant negative effects during the first wave of the virus will continue to face challenges in 2021:

  • During the first week of January, about 1 million people filed for unemployment, according to the U.S. Bureau of Labor Statistics. The national unemployment rate is high at 6.7%, nearly double last February’s rate of 3.5%.
  • By January 15, only about 12.2 million people in the U.S. had received first doses of COVID-19 vaccines. The vaccination rate has fallen short of the country’s initial goal of inoculating 20 million people by the end of 2020.
  • The Centers for Disease Control and Prevention (CDC) predicts that in the four weeks prior to February 6, 1.3 million to 2.4 million new cases of COVID-19 will be reported in the U.S.
  • By March, a fast-spreading COVID-19 variant could become the dominant source of infection in the U.S., according to the CDC.
  • The delayed signing of the second federal stimulus package created anxiety and confusion for U.S. businesses and workers, and provided only limited relief. An emergency COVID-19 stimulus package is being planned by the new presidential administration.

As many states impose business restrictions in high-infection-rate areas, such as putting limits on capacity levels or mandating temporary closures, organizations are keeping a close eye on cash flow, liquidity, and financial stability. Their insurance coverage, which is often a lesser concern, may become more costly or restrictive upon renewal because of virus-related challenges.

Unanticipated rate and coverage changes, including higher deductibles, as well as capacity and coverage restrictions, can unfortunately catch business owners and operators by surprise. Most owners and operators are focused on day-to-day survival, and don’t have the time or means to research options or negotiate terms.

Market Challenges

Many property and casualty insurance carriers have been significantly impacted by COVID-19, and are adjusting premiums and product offerings to cover rising costs, excessive losses, governmental and regulatory requirements, and changes in consumer demand. For example:

  • Some property insurers are including an absolute communicable disease/pandemic exclusion on policies issued after March 15, 2020, likely in response to loss results on communicable disease coverage offered between 2019 and 2020.
  • Event cancellation insurers have had large losses related to the shutdowns of event venues in the U.S. and abroad. Many lawsuits related to these closings are still in the courts, and are expected to affect carrier expenses in coming months.
  • Errors and omissions (E&O) rate and retention increases are due in part to the COVID-19 insurance claims environment, volatility of financial markets, and concerns about increased regulatory oversight.
  • Workers’ compensation has been relatively competitive in recent months, although rates are likely to be affected this year by COVID-19 claims, reduced employer payroll and premiums, and changes in worker classifications.
  • Workers’ compensation rates may also be affected by recent and proposed state legislation establishing presumptions of compensability (also referred to as “presumptive liability”) for workers who contract COVID-19. Presumptive liability extends benefits to a broader group of employees, including first responders, healthcare and social assistance workers, and others presumed to have contracted the virus while at work (specific criteria must be met). Compensable COVID-19 claims are likely to reduce the pace of rate reductions in many states and flatten or increase rates in the long term.

How USI Can Help

If your business is suffering from the effects of COVID-19 and the resulting economic downturn, USI Insurance Services can identify solutions to improve your cash flow and liquidity, allowing you more time to focus on day-to-day management and operational needs.

For example, we can help you better understand the difference between a guaranteed cost program, in which your insurer covers losses for a set premium, and a loss sensitive program, in which your business assumes the losses directly. To determine the most appropriate option for your company, we conduct a thorough, comprehensive cost-benefit analysis and modeling scenario. If you are already enrolled in a loss sensitive program, we can help you determine if absorbing additional loss through higher retentions or other strategies would offer a compelling cost benefit.

We can also help you pursue other methods of improving cash flow, such as by negotiating installment plans with carriers, investigating premium financing options, and researching available government assistance programs.

Your company can kick-start USI’s team-based, consultative approach by initiating your coverage renewal process 150 to 180 days in advance. This will allow adequate time to evaluate your current insurance program, identify risks and exposures, research markets and alternative carriers or strategies, and take other important steps toward reaching an effective solution. You can assist us further by:

  • Providing policy, risk management, claim, and related information to help us understand your current situation and specific needs
  • Following and maintaining established safety and health protocols (governmental and regulatory)
  • Preparing for underwriting questions and accommodating site inspections if requested (virtual visits may be an option)
  • Completing applications and questionnaires fully and accurately
  • Visiting our Public Health Emergencies site for helpful COVID-19 resources and materials

To learn how USI can help mitigate the impact of COVID-19 on your business, contact your USI representative or email