Reshaping Claims Trends
The COVID-19 pandemic continues to alter how we work and live across the globe. It is also altering claims trends and risk exposures. According to a new report, Covid-19 – Changing Claims Patterns, from Allianz Global Corporate & Specialty (AGCS), with the reduction in economic activity during lockdown phases, traditional property and liability claims have been subdued. Below are a few highlights from AGCS’s report:
Property/Business Interruption: Property damage claims were not significantly impacted by Covid-19. However, as production lines restart, this can exacerbate the risk of machinery breakdown and damage and even fire and explosion. Covid-19 has caused business closures globally – which often may not be covered. However, the pandemic has impacted the settlement of standard business interruption (BI) claims in different ways. On one hand, factories in hibernation will not produce large BI claims. On the other, lockdowns can lead to longer and more costly disruptions as restrictions prevent effective loss mitigation.
Liability and Directors & Officers: To date, AGCS said it has only seen a few liability claims that are Covid-19 related. However, liability claims are typically long-tail with a lag in reporting, so general liability and workers’ compensation claims may yet materialize. A number of outbreaks of coronavirus have been linked to gyms, casinos, care homes, cruise ships or food/meat processing plants. Insolvencies, as well as event-driven litigation, could be potential sources of D&O claims. To date, there has been only a small number of securities class action lawsuits related to Covid-19 in the U.S.
Aviation: The aviation industry has seen few claims directly related to the pandemic to date. A few passengers have sued airlines for cancellations or disruptions. Slip and fall accidents at airports – traditionally one of the most frequent causes of aviation claims – have declined. Joerg Ahrens, global head of Long-Tail Claims at AGCS, says grounded airline fleets might be exposed to damage from hurricanes, tornados or hailstorms.
Cyber: During the pandemic, cyber risk exposures have heightened, with reports of the number of ransomware and business email compromise attacks increasing. To date, AGCS has only seen a small number of cyber claims which are Covid-19 related.
Activity: Claims notifications from motor accidents, slips and falls or workplace injuries slowed as more people stayed at home, and with the temporary closure of many shops, airports and businesses during lockdowns across the world. AGCS said it noticed a positive impact on U.S. claims settlement from the suspension of courts and trials. Some claimants and plaintiffs have been more open to negotiating settlements out of court rather than opting to wait a long time until their case is scheduled. In general, claims activity is likely to pick up again following resumption of economic activity, the insurer predicts.
Long-Term: According to the report, Covid-19 is accelerating trends such as a growing reliance on technology and rising awareness of the vulnerabilities of complex global supply chains. Going forward, many businesses are expected to review and de-risk their supply chains and build in more resilience. This could involve some reshoring of critical production areas because of disruption caused by the pandemic. Such a move would likely impact frequency of claims and the costs of any future business interruptions.