~ by George Grieve

The P&C Insurance Market is Surviving the Effects of Covid – So Far

If you make your living in the P&C insurance market like the CastleBay Companies, then you are vitally interested in how your carrier clients are faring during the Covid pandemic. I am grateful to be involved in an industry that is socially and economically important and by necessity and regulation, fiscally conservative. To say P&C insurance is recession-proof would be an exaggeration, but not a gross exaggeration. For most of us, auto and homeowners insurance is not an optional expenditure. Yes, we can increase deductibles and lower coverage limits but, unlike life insurance or buying discretionary goods and services, we cannot just stop paying our bills. This fiscal conservatism and recession-proof-ness is doubly welcome in the age of Covid.

Unlike P&C Insurance, Covid Has Forced Entire Industries to Virtually Cease Operations

While Covid has brought entire industries – think travel, entertainment, and hospitality – to their knees, and hurt banking with soured loans and life insurance with increased mortality, P&C insurance remains relatively unscathed. At least for now. That said, the industry is not a homogenous monolith and different markets are experiencing Covid differently. Here are some examples:

  1. Auto Insurance carriers have seen significant reductions in claims frequency – enough in some cases for carriers to issue premium refunds. (Cynics might call this a defensive measure to buy off political pressure to lower rates.)
  2. Workers’ Compensation carriers are bracing for increased claims due to on-the-job related Covid cases.
  3. Business Interruption coverage, generally available in many commercial lines of business, has been besieged by lawsuits (unsuccessfully so far) claiming that Covid losses are covered.

Next Year’s Financial Outlook will be Affected by Covid, Vaccines and Politics

In addition to Covid, we have had an active hurricane season in North America, so it’s not been a great year, except by contrast with less fortunate industry sectors. It will be telling to review the industry’s 2020 financials in an historic context. As to next year’s outlook, results will partly depend on the speed with which promising vaccines can gain regulatory approval and then achieve mass production and distribution. As of this writing, Covid cases are again spiking across the US while a potentially more “shutdown-focused” White House administration is waiting in the wings.

Covid Forced Many Carriers to Realize that they Lack Digital Engagement for Customers

From a technology perspective, carriers spent the early days of Covid wrestling with the new and sudden need to support a remote work force. As this wave passed, many carriers had the overdue realization that their digital engagement opportunities for customers to buy, service and pay for insurance coverage was not up to par. In some cases, these technologies offer a “twofer” for carriers. For example, electronic payment technologies not only promote policyholder ease of use, they also enable carriers to collect payments without sending staff into the office.

Ongoing Core System Projects Continued, Some Projects were Postponed

In the background, ongoing multi-year, core system projects mostly chugged on. Projects that had not started or that could be postponed were. It looks like the industry will incur some technical debt this year, which will lead to increased project activity next year or later, depending on the course of Covid.
As the year end comes into view, I have three wishes:

  1. That 2020 turns out to be the year of Covid, not the first year of Covid
  2. Everyone gets a vaccine in the New Year
  3. P&C insurance, my professional home for the last 35 yrs, resumes its steady, reassuring growth as a more customer-enabled, innovation-focused industry.

George Grieve, an industry veteran consultant, writer and speaker, is the founder and CEO of the CastleBay Companies. Prior to CastleBay he held executive IT and business operations positions in P&C insurance carriers.