Global insurance losses from the Covid-19 pandemic will be higher this year than the US$107 billion Lloyd's of London had estimated, Chairman Bruce Carnegie-Brown said during a Reuters Event ‘Future of Insurance USA’. He said that pandemic-induced losses will be similar to the ones seen in 2017, when three Atlantic hurricanes caused a total of $144 billion in losses. This was the highest amount on record so far, according to statistics from Swiss Re.
Lloyd’s, which shut its underwriting room for the first time since World War II during the UK government lockdown, said Lloyd’s firms were facing claims from 16 different business lines. “Unlike many events, a pandemic is everywhere at the same time,” he said, adding that the outbreak had extended longer than expected.
Asking governments for help
Lloyd’s said it will pay $3.2 billion in pandemic-related claims for the first six months of 2020. The company proposed a ‘Black Swan’ reinsurance scheme to governments globally to make sure better cover was available during the pandemic and other disturbances, but Carnegie-Brown said it was difficult to get government attention on the topic so far.
“The challenge for governments, of course, is that they are very short-term focused. It’s very difficult for them to lift their heads above the parapet and think about the future,” he said.
Communication with insurers is key during pandemic
However, a rare positive for insurers from the Covid-19 pandemic is that small and medium-sized enterprises (SMEs) in the UK believe their communication with regards to Covid-19 has been strong, and this will remain essential throughout this second lockdown, according to analytics company GlobalData.
According to GlobalData’s 2020 UK SME Insurance Survey, 63.6 per cent of all SME’s in the UK are either somewhat satisfied or very satisfied with their insurer’s performance in terms of 'communication about the impact of coronavirus on my insurance cover’. Furthermore, over a third of respondents (34.2 per cent) were very satisfied. Only 9.4 per cent were unsatisfied with the communication.
A second lockdown might be challenging for insurers
Ben Carey-Evans, Insurance Analyst at GlobalData, commented: “This will be encouraging for SME insurers, as in difficult times such as these, maintaining contact and a positive relationship with clients is essential to retaining them. It is key for SMEs in the UK to know exactly where they stand with their insurance, what they are covered for, and what they are not, as they continue to work under heavy restrictions. This data indicates that insurers have been doing a good job so far.
“However, the survey was carried out before the second UK lockdown was announced. This will cause further problems for many SMEs and insurers, with claims likely to rise again as many businesses are prevented from operating. Therefore, it is essential that insurers maintain, if not improve, this level of communication, as retentions next year – amid squeezed budgets and stories of failure to pay out claims – will be challenging.”
Travel insurers are seeing big losses themselves this year, with travel restrictions in still in place in many countries. Strong communication and budget planning will be essential for them, while dealing professionally with stories of unpaid claims.