Insured losses amounting to $44 billion during the pandemic and risks of newer variants popping up increased the strain on risk management companies around the world, said a recent report by international insurance intermediary group Howden.
Although enormous losses have been reported so far, Howden said that it still lags far behind the $100 billion loss predicted at the beginning of the pandemic. The first nine months of 2021 were hit with $5.5 billion in claims for global insurers, while 2020 recorded $3.5 billion. The insurance industry was hopeful with the rollout of vaccines, but variants like Delta kept people hospitalized for longer periods and in more severe conditions.
COVID-19 was third in line for the biggest amount of losses after Hurricane Katrina and the 9/11 terrorist attack, said the broker. As companies were forced to shut down from region-wide lockdowns and the resulting loss in business, along with mass cancellation of events, insurers took away COVID-19 coverage from certain policies.
“There’s only so much event cancellation coverage out there, there’s only so much civil action coverage out there, and when you get to $40 billion, that’s pretty much exhausting what was underwritten,” said David Flandro, head of analytics at Howden.
The amount of losses directly correlates to the computation of premiums. The Centers for Disease Control and Prevention (CDC) calculate “excess deaths” by subtracting the expected number of deaths from the observed number during specific time periods.
Since Feb. 1, 2020, there have been 952,707 excess deaths in the country, according to estimates from the CDC, that could be directly or indirectly attributed to COVID-19.
“Death rates are up 40 percent from what they were pre-pandemic,” and numbers being reported vastly understate the actual death loss among working age people from the pandemic, said Scott Davidson, CEO of insurance company OneAmerica, in a video conference held by the Indiana Chamber of Commerce and the Indiana Hospital Association.
“It may not be all COVID on their death certificate but deaths are up in huge numbers. We’re also seeing an uptick in disability claims. At first, it was short-term disability claims and now we’re seeing long-term disabilities.”
Davidson’s company offers employers group life insurance that mostly covers people from 18 to 64 years of age. Premiums have started to give up as the costs are rising for employers. “Most of us in the industry are starting to target, and add, premium loads on to employers that are based in counties that have low vaccination rates,” he added.
Interest in purchasing insurance has gone up during the pandemic. However, the underwriting process that decides the premium has evolved as in-person health checks have now become difficult with social distancing rules.
Many insurance companies have resorted to video calling potential clients, conducting phone interviews, and reviewing their physician’s prognosis, instead of conducting direct physical health examinations. Insurers are also opting for increasing automated underwriting to make larger policies available to the public.
Claims in the Americas during Q3 went up from $31 million in 2020 to $111 million for Dutch insurer Aegon. Metlife and Prudential Financial also reported a hike in claims. Munich Re, the German multinational reinsurance company, elevated its 2021 pandemic-related life and health claim estimate from $458 to $687 million dollars.
Reuters contributed to this report.