Lessons Learned in an

Lessons Learned in an Insurance Context: Action Items Related To COVID-19

By Russ Davies and Scott Loy

Virtually every business across the United States and globally has now had “the conversation” with their risk manager/insurance agent and learned that novel coronavirus (or any other pandemic situations for that matter) is not a covered cause of loss in their insurance policy.

Common frustrations include: “Isn’t this what insurance is for?” “Isn’t insurance supposed to be there for the unexpected, unthinkable situation that could happen to MY BUSINESS?” “I have paid and paid for this coverage, and the first time I go to use it – nope, not covered.”

These frustrations are certainly relatable and understandable. The intention in sharing the following is not to defend the insurance industry, but to provide potentially unconsidered context in a frustrating situation.

■ This is not actually what insurance is for: Insurance is about spreading risk – not handling a catastrophic and nearly universal loss like a pandemic. ■ Businesses did not pay for the coverage: Because the potential negative economic impact with a pandemic is so catastrophic and universal, polices were not designed to provide coverage for them, nor was premium collected for the risk. According to industry journals, the estimated monthly price tag for these losses is between $220 and $389 billion monthly. Premium to cover this risk would have been insanely expensive and, if offered, the market would have likely rejected it.

■ Insurance covers the expected, thinkable situations: If forced to cover business interruption losses, many insurance carriers wouldn’t have the funds/premium to meet the monthly responsibilities and obligations to cover losses that are clearly stated in their policies (for example, fire, theft, auto accidents and negligent damages). Within a matter of weeks, and potentially quite messily, the insurance industry would find itself in an insolvent situation.

What can you do about it now?

Turn In the Claim – While not creating false hope, the recommended action right now is to submit the claim to your insurance carrier and have them determine exactly how your insurance coverage addresses the situation. Helpful information to submit would include a synopsis of financial information both preand post-virus, and a description of how the situation impacted your business.

Review Your Liability Exposures – Have a conversation with your agent about your revised business forecast. Does it make sense to change your anticipated annual sales and payroll? Reducing these exposures you could lower your estimated liability premium. Why not keep the money in your pocket rather than wait for the annual audit to return unearned premium?

Review Your Auto Fleet – Are there idle vehicles that could be reduced down to comprehensive coverage only? It’s important to note that this action would remove the liability coverage from the vehicle, so it is equally important that coverage be put back on when the vehicle is returned to service. You might consider placing a sign on the steering wheel of the vehicle informing the would-be driver to reinstate the insurance before driving.

It is hard to acknowledge that few saw this reality coming. There is probably a 99 percent chance you or your agent never considered the outcomes of COVID-19 as a realistic possibility. Hindsight is always 20/20 in situations like this.

Moving forward, the best thing we can do is learn from our shared situation. Are you having a good conversation with your insurance adviser? Are you listening to the counsel your agent is giving you in other risk areas? While a pandemic threat seemed unrealistic just months ago, there are known and emerging threats we’ve been talking about for years like cyber liability.

Cyber Policy – Cyber liability insurance might be the most important piece of insurance any business owner purchases. It is a policy designed to protect you from cyberattacks like ransomware, phishing and social engineering. Market data shows that a cyberattack is much more likely in this day and age than a fire. These attacks do not discriminate when it comes to large and small companies. In some cases, small to medium companies could be more vulnerable to an attack than larger corporations. This is because in many cases there are less stringent securities and protocols within the company when it comes to its IT. This cyber exposure is even more of a risk with many companies moving to a remote workforce in response to COVID-19. A remote work force can open the door for cyber criminals by way of home internet. These connections are less secure and not monitored like robust commercial networks.

Lastly, we are all trying to navigate uncharted waters to the “new norm.” Protect your business from unexpected Liability or Workers Compensation claims by following state/federal issued guidelines. Take social distancing and personal protective equipment issues seriously. Monitor your workforce for symptoms, and do not allow symptomatic employees to return until cleared by a medical provider. Establish in advance a communication plan to calmly communicate if and when an employee tests positive. The “new norm” may be years away. While we are running and learning a lot in the initial sprint, consider what may need to change to survive the marathon.

About the Authors

Russ Davies and Scott Loy are insurance consultants with Andres O’Neil & Lowe, a leading insurance and risk management firm focused on commercial and cyber liability. For more information contact Russ Davies at russd@andresoneilandlowe.com or Scott Loy at scottl@andresoneilandlowe.com or visit www. andresoneilandlowe.com.