Rex and Cheri have the answers. Listen here.
Insurance Talk — How Insurance is Responding to COVID-19
Cheri Martinen – Welcome to Insurance Talk with Cheri Martinen and Rex Lesueur. We are the father-daughter team from Bancorp Insurance located in beautiful Central Oregon. Bancorp Insurance is a family run insurance agency specializing in personal lines such as home and auto as well as commercial lines. We’re talking about the businesses out there that need help, and we also help with your Medicare and healthcare insurance needs.
Today we’re talking about a subject that’s been overly talked about for the last 60 days: COVID-19. We did a blog on this right when it came out, but we didn’t put it into the verbal platform and so we thought we’d just recap what we came out with right at the beginning versus what we have now and where we think we’re going in the future.
Business Insurance and COVID-19
Rex Lesueur – And we’re going to keep this strictly to the insurance issues regarding COVID-19. You can watch CNN, Fox, MSNBC, and they’re going to give you all the information you need to know and we really do encourage people out there to be safe, stay home if you can, try to social distance, do all the things that you should be doing. But let’s talk about how this is impacting the insurance world.
There’s some good news and some bad news. Let’s start off with the bad news. There have been people who have called and said, “Does my insurance policy cover me for anything with COVID-19?” That question covers a lot of territory and we’ll start off where most people think it should cover, and that is in a commercial policy with their business interruption insurance. Business interruption coverage is the coverage that, in the event that you have a claim, the insurance company is going to help pay the bills until you get your business back up and running.
CM – And originally, the main thought is fire. So you have a fire in your building. The fire has been put out, there’s water everywhere, everything’s burned. You have to have a restoration company a lot of times come in, clean, maybe buy new furniture, new drapes, new paint, everything gets fixed, but the restaurant can reopen after it gets better. And then a lot of times these have a little deductible, but they’re time deductibles.
RL – Usually it’s 24, 48, or 72 hours. And they don’t pay for any part of the claim for that deductible period. And this is excellent coverage and we promote it to all of our customers that have a physical plant that would, in the event that plant was damaged, whether it’s a restaurant, an office, a real physical manufacturing location, just about anything, that we include that in their coverage. The bad news: the policy is written in such a way that something physically has to happen to the property and it has to be a covered peril. And the perils run along the lines of fire, wind, hail, smoke, riots, civil commotion, vehicles, falling objects, vandalism, malicious mischief, etc. Those kinds of things are what is covered. The virus didn’t damage anything. It didn’t fit.
CM – It’s not like mold or something where it physically hurt the building.
RL – Yep, the building is still there, nothing’s wrong. Everything is as it was. It might be vacant. It is definitely not generating the kind of income that it was before the event, but nothing happened to it, so the insurance policy is written in such a way that now you’re not going to get paid for a claim.
Bacteria, Mold and Viruses Exclusions
CM – They also started adding that tricky exclusion on some of the policies for bacteria, mold and viruses.
RL – Yes, that exclusion is on a lot of them. Some policies actually said just bacteria and mold and they didn’t say virus. All the new ones are going to say virus included. There’s movement afoot, there’s actually a couple of people in Washington, some congressmen have felt that this is something that should be addressed by the legislature, and they are talking about maybe forcing the insurance companies to pay those kinds of claims.
The issue, if that happens, is that the insurance companies did not plan for those kinds of claims, they didn’t underwrite it. They didn’t price for it. And if that happened there would be trillions of dollars worth of claims paid by the insurance companies. Some would go out of business. I know that won’t break a lot of people’s hearts, but some would go out of business and the others would end up raising their rates to compensate for it. So we’d all end up paying for it one way or another. It just would be a different way of transferring the risk from one section of the society and business world to another section of the society and business world. Is it going to happen? I don’t think so. So that’s where we’re at with that.
CM – I did hear something that it might end up more like terrorism coverage. Have you heard anything about that? Where you have to sign something saying, yes I wanted additional coverage for viruses, where you’d pay a little bit more.
RL – Actually I haven’t seen that. And if that was something that happened, I would recommend that they do it. There might be a way of doing something with some kind of a reinsurance program back through the federal government. Kind of like the flood program right now. When you buy flood insurance, it all goes back through the feds. You might buy it from a regular insurance company, but they reinsure it 100% back to the federal government. So there’s really no risk to that insurance company. They’re just a distribution arm of the government the way they do that. So we’ll see. But that’s something that’s going to happen. If it does start to happen, we’ll definitely talk about it here on Insurance Talk.
Auto Insurance Companies Give Back
Let’s go into some good news. Good news is most of the major insurance companies have been giving people discounts on their insurance, on their auto insurance to be specific, because they’re not driving as much. Some companies have been giving as much as a 15% discount. This is only for two months, so it’s not a lot if you figure that the average insurance policy for a family costs between $100-$200 a month, 15% off is $15 or $30. $15 or $30 isn’t a lot but it’s something, and recognizing the fact that the risk has changed, that the exposure to claims is down, that people aren’t going anywhere and they’re not driving. I don’t know how many memes I’ve seen on Facebook where someone asks how many weeks do you get to a gallon of gas nowadays? Now it’s months.
CM – How many months to a gallon of gas do you get? Oh, you know, one, I’m doing great nowadays.
RL – It’s like your transportation costs have dropped dramatically. There is an area that’s up for grabs when it comes to COVID-19, and that’s worker’s comp. Worker’s comp, and we’ll be talking more about that in our next segment, if someone can prove that they were exposed to COVID-19 on the job and nowhere else, the worker’s comp might, and I’m going to put a big underline under the “might” there, might actually respond. It’s not likely, but if you’re pretty sure that you know you were exposed exclusively at work and nowhere else, and you feel that your employer was negligent in exposing you, then maybe there might be a comp. And so we’ll see how that happens. We’ve not turned in any, I know that some have been turned in. I do not know where they’re headed through the process. I assume that there’s going to be court cases and it’ll be six months before we know what’s going on with that.
COVID-19 and Workers Comp
CM – And another kind of upside, thinking of worker’s comp, I know a lot of insurers, going back to auto insurance, have actually been helping out with bills. I don’t know how long it will last, but they’re talking about pushing out people’s bills. There are no cancellation notices being sent out. They’re saying you have extra time and they just extended that another 30 days to June 22nd. So there’s a lot of time, especially on the personal auto, to have that extended based on if you’re working or not working, or what state or county you’re in, and what flux of opening you’re in. So the insurers are thinking, they’re trying.
RL – Extending it out too far, though, if you’re struggling to try to make your payments, makes a snowball effect. Next thing you know, on June 22nd, the executive order from the governor is over and you haven’t paid your premium in three months. All of a sudden you’ve got three months worth of premium to make.
CM – And normally you don’t get three months of paycheck all at once.
RL – I don’t know whether they’re going to spread that out over a period of time. We don’t know. There is no clear determination of how this is going to end. Just like we’d have no idea how this whole virus thing is going to end, and I’m hoping we’re seeing the curve flatten, seeing the cases in some states go down, others go up so it’s pretty scary.
The Ups and Downs of Insurance and COVID-19
CM – Thank you for joining us on Insurance Talk. Again, we were just going over some of the ups and downs of how insurance is responding to COVID-19. How the companies are trying to help with the cost. And also their backside, why it’s hard for them to plan a regular day at this point. Join us next time, we’re going to be going over some of the stickier stuff with COVID-19, more on the HR side than the insurance side, and maybe how you as a business owner or as an employee might see your work change in the future. If you have any questions, you should call us at Bancorp Insurance, 1-800-452-6826.
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Disclaimer: This content is provided for general information purposes and is not intended to be used in place of consultation with our agents.