The Covid insurance paradox: Prices are rising despite the drop in reported claims
07. December 2020
This applies not only to insurers but also to brokers who must work in the interests of the client, whom they must assist during this difficult period and help him survive with the smallest possible losses. Therefore, we are actively discussing with our clients and evaluating the effects and possible measures regarding insurance, and we also offer the same to our potential clients. We see the services provided by brokers as an essential part of the overall risk management of each company, so do not hesitate to contact us.
What is our knowledge concerning the impact of the ongoing second wave of the pandemic on claims for damages and how does it compare with the first wave? We will try to summarize it in the following sentences.
The clear impact of government measures on the operations of our clients can be seen primarily in those who have been directly affected by these measures. The claims for damages by the operators of accommodation facilities and restaurants have dropped to practically zero. Also, in schools and other government funded organizations claims for damages fell by about 62 % in October compared to September, while in November we are at almost zero. In the countries where we operate in Central and Eastern Europe the situation obviously varies depending on what measures the governments of these countries have adopted. In some instances, the definitive closing of operations has not happened, but borders have been closed what unfortunately has similar consequences mainly for the tourism and service sectors.
Although the transport sector seems to be almost untouched, we observed also in terms of car insurance a decrease in number of claims. We see it connected mainly to the general slowdown in activities of companies as they move towards working from home and restrict travelling in order to minimize sickness of their workers and thus ensure the basic running of their operations. Regarding car insurance, for the past thirty days we have registered a decrease in the number of claims of about 20 % in comparison with a thirty-day period prior to this. If we compare it with equally long periods before, the drop is by as much as about 34 %. This side effect of people being in general more cautious is evident across all countries.
When it comes to travel insurance, an increased number of claims was recorded mainly in the first wave of the pandemic. These were mainly associated with the costs incurred by cancellation charges due to the cancellation of various conferences and professional meetings. During the second wave it has been clear that the organizers of such events, both due to the uncertainty of further developments and as a result of the restrictions, have moved to the virtual world and organize their events primarily via an online format. Thanks to this, we have not noted any significant number of claims related to cancellation fees in the second wave.
A big question mark still hangs over the so-called D&O insurance, i.e. the insurance of company executives and management. The tightening of rates and conditions within this type of insurance was more evident in Western Europe rather than in the Czech Republic but insurers in the CEE region also found it hard to resist the pressure put on them. The number of claims made in 2020 is almost identical to the number in the previous year and so far none of them have been raised by our clients in direct relation to the pandemic. However, we believe that in many cases it is still too early for claims. Decisions of executives that would, for example, be in contradiction with due diligence, and therefore losses resulting from this would be applicable from the D&O insurance, are likely to be felt only in the "post-covid” period when it will be possible to evaluate not only the impact of such decisions but also the possible liability of the executive. Bearing this in mind, an increase in rates and a tightening of conditions beyond the previous increase is to be expected, and the countries of Central and Eastern Europe will not be an exception to this.
Director of Claims Department RENOMIA GROUP