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How COVID Changed the Insurance Industry

The pandemic ushered in a new era of innovation as well as policy changes.

Over the last year and a half, many aspects of our society have changed due to the COVID-19 pandemic.

One industry that felt the effects as much as any was the insurance industry. As any insurer, broker, or agent will say, there is a lot of discussion around “the state of the market.” In fact, it’s difficult to find an aspect of the insurance industry that did not experience some shift in operations.

Even before the COVID-19 pandemic hit, there was an expectation of a looming “hard market.” What this means for the industry is that there is an upswing in the market cycle when premiums increase and capacity for most types of insurance decreases.

While the insurance market is based on demand (from the insured) and supply (from the insurers), there are two additional factors that play a role in determining what kind of market there will be: insured losses and financial markets.

As anyone with insurance knows, when there’s an insured loss, rates often go up as financial stability of an organization is affected. Throughout the pandemic, insured losses have escalated because of factors such as the inability of adjusters to reach and assess damage as well as assess insured assets and risk, all in a timely fashion.

While the effects the pandemic is having on the insurance industry will continue to develop for many years to come, there are already a few trends emerging. Below, we take a look at a few of those trends and also discuss what has changed in the most familiar lines of coverage, such as property, liability, and workers’ compensation.


The need for commercial property space has changed dramatically since 2019. In a survey conducted by TransUnion, 37% of respondents indicated a preference to work from home full-time, with 31% of respondents preferring a hybrid of working from home and office. What these results suggest is that there is a decrease in property assets.

As more employees are working from home or working a hybrid schedule, this change may usher in a new era of smaller offices and campuses. In turn, this would decrease the need for commercial property insurance, at least on the same scale as it was before the onset of the pandemic.

Another major trend emerging across the board is digital adoption. In the insurance industry, digital adoption increased globally by 20% in 2020, according to the same TransUnion survey. This digital innovation affected respondents in all areas such as filing claims, communication, and app usage. 47% of respondents filed an auto and/or property claim last year, and 39% of those that filed claims did so on a mobile app, website portal, or via email.

On the subject of digitization, respondents indicated their communication preferences for interacting with their insurance provider. Those results include 32% of respondents preferring email, 32% preferring telephone calls, followed by 18% preferring a mobile app or website portal.

As more time passes, the insured can expect to see an increase in digital innovation. The real trick will be for insurers to balance that innovation with positive customer support and fraud protection.


Many changes have been made to accommodate covered individuals due to shortcomings caused by the pandemic. Accommodations such as extending cancellations, payment credits, online claims portals, and refunds have made it so drivers can keep their insurance.

Specifically considering the auto insurance industry, these accommodations have been very volatile. With the pandemic lasting longer than expected, insurance companies are having a hard time keeping up with how to shape their offerings.

At this time, a lot of insurance companies have ended these programs. For example, many insurance companies provided premium discounts or refunds due to changes in behavior and trends brought about by the pandemic. However, most of these offerings have expired as business continued its return to pre-pandemic levels.

Workers’ Compensation

Workers’ compensation has been an area in insurance that has been greatly talked about and modified by policymakers. Workers that may have been infected by COVID-19 have needed to find a way to recover not only in terms of health, but financially as well.

Workers’ compensation laws and regulations differ state to state, so recovery will depend on the state and coverage. Workers’ compensation coverage allows medical coverage and wage replacement. The question here is: does workers’ compensation cover COVID-19 and COVID-19-related complications. Some states are considering workers who do get COVID-19 to file a claim under workers’ compensation as they are work-related. Many states, however, have rejected COVID-19-related bills.

For Colorado, specifically, SB20-216 outlines that if an essential worker who works outside of the home contracts COVID-19, then the contraction is presumed to have come from employment and is considered a compensable accident, injury, or occupational disease. Although this bill was defeated, it could resurface in the future.

Property & Liability

Another area of insurance that has been affected by COVID-19 is property & liability coverage. Since the beginning of the pandemic, businesses around the world have taken a hit. Although, when we are talking about property losses, we aren’t focused on damaged buildings necessarily. In fact, property damages claims were not significantly impacted by COVID-19. The impact on property coverage has primarily come from indirect sources.

For example, decontamination costs have increased as a result to the pandemic. In this instance, a business that experiences an outbreak on their premises may also need to send their workers home for a set amount of time. This can increase equipment costs that weren’t there before. With the concern of employees’ safety, many businesses have also had to make purchases that make the premises as safe as possible.

Finally, taking a brief look at the liability side of coverages, COVID-19 has made only a negligible impact. However, liability claims typically take time to fully materialize, meaning that there may be a lag between incident and claim filing. For example, a number of COVID-19 outbreaks have been linked to various businesses and venues. Over time, some instances may prove to be a liability exposure.

Pandemic Insurance

As businesses have shut their doors, some temporarily and some permanently, the concern of keeping businesses up and running has caught the attention of many. This is why there is talk within the industry about deploying pandemic insurance.

Pandemic insurance already exists, although it is not commonly offered. Even though the last worldwide pandemic was 100 years ago, the devastation from not being prepared affected millions. But even after the COVID-19 pandemic, this type of insurance faces an uphill battle to materialize on a large scale. However, because pandemic insurance could relieve financial strain, continued discussion of its efficacy is likely to occur as the pandemic continues.

One major area that is driving this need has resulted from business interruption claims, as well as the rejection of them, which have been a major part of the pandemic. Moving forward, insurers are reconsidering marketing materials and policy language to ensure that definitions of what constitutes business interruption are clear. As a result of the dramatic effects the pandemic had on small businesses, insurers such as Chubb and Lloyd’s of London are developing programs to help protect small businesses in the event of another event that results in lockdowns.

Beyond the Pandemic

The COVID-19 pandemic has been unlike anything the insurance industry has ever seen. More than a typical catastrophe, the exposures that have arisen over the last year and a half have touched almost every aspect of the industry. While the industry has positioned itself in a way to deal with the impacts, many aspects are still in development. It is only with time that the industry will continue to learn, develop, and adjust to this new way of doing business.

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