Insurance brokers: Will insurance premiums increase this year because of coronavirus?

Each state controls increases in insurance rate increases. Insurance companies ask the insurance department for rate increases. Insurance cannot arbitrarily increase their premiums. 
There in one thing for sure long term care premiums are going to increase. Long term care Insurance is a use it or lose it product. Say you and your spouse have a five year 90 day elimination  with cola and you pay $10,000 a year in premium for 30 years. You have just transferred away $300,000 and what you could have earned if you don’t use your LTC insurance. Wouldn’t you be better off if you had taken another option and used a LIRP that provides a benefit for long term care and if you don’t use it the LIRP can produce tax free income and a tax free legacy benefit for your loved ones when you pass away? I am a Power of Zero advisor and I use this strategy with my client. I can be reached at [email address]. 

Companies can not just raise rates, they have to be filed and approved from the Insurance Division in our state. They could have already turned in their insurance rate increases or decreases before the COVID even started!

For health insurance, the latest Milliman report indicates that there are multiple variables affecting long-term estimates and that no one can accurately predict what 2021 will look like at this time. However, they do predict that initial claims payouts will actually decrease due to the deferral of voluntary or unnecessary surgeries/treatments and the reduction of medical services rendered due to social distancing mandates (telemedicine has seen a large increase in utilization). These reductions will initially offset the increases due to the treatment of COVID-19 claims.  This may have a positive effect on premiums in the short-term, however, the long term could be vastly different. 

Currently, Milliman is expecting an increase in 2021 costs and that multiple variables (amount of deferred care actually rendered at a later date, level of infection rates in geographical areas, types of carrier payments, if we have a "second wave", etc.) will impact the severity of the increases. Over this past weekend, carriers reflected this uncertainty as they started submitting their increase requests and those requests varied from 2% all the way up to 38%. 

The key is that they state "estimates rely on a number of key assumptions that are subject to extreme uncertainty given the limited experience". It is now more critical than ever for employers to stop implementing "boxed solutions" and start managing their healthcare supply chain in an effort to establish more predictable outcomes for one of their top 5 largest expenses on their P/L!

I work on the business insurance property and casualty side, so I can’t speak to personal lines or group health insurance.  When it comes to this topic, there are more than one 64-thousand dollar question.  Currently insurance carriers are denying coverage for coronavirus pandemic claims for business interruption based on the requirement that there has to be direct physical loss or damage to the insured’s premises.  Additionally on third-party general liability claims coverage, insurance carriers are denying claims based on the fact that most commercial general liability insurance policies contain a bacteria and or virus exclusion for bodily injury.

However, the insurance industry is currently facing increasing pressure from plaintiff attorneys, business owners associations and state legislatures urging them to cover claims related to the coronavirus.  The insurance industry’s response is that providing coverage for coronavirus pandemic claims would essentially wipe them out.  The American Property Casualty Insurance Association recently estimated that in the US, monthly small business losses are somewhere between $255 billion and $431 billion, compared to $6 billion monthly premiums that they collect for property insurance lines.  They contend that their actuarial rates did not contemplate the losses that would have to be covered as a result of the pandemic.  Moreover, they contend that the Insurance Service Organization (ISO) insurance policy forms most standard carriers use have adequately addressed the exclusions for mold and bacteria and communicable diseases.

There does not seem to be a short-term solution, but I suspect that future business insurance policies will continue to get more restrictive in language, and the insurance industry is headed for a hard market – when premiums increase and capacity decreases.

This is something that is difficult to answer. The principle of insurance is to provide protection for whatever you are wanting to insure. The insurance company looks at all factors that apply and through development of the risk involved establishes a rate they feel is adequate.( premium) The coronavirus, being the first major pandemic in over 100 years, it is hard to define if this means situations like this will become more normal or if this is like the plague and will not occur for another 100 years or more. That is what makes things hard to predict. There may be some changes in premiums, but perhaps only in the health end of the business, and that is a guess at this point.

The senseless riots around the country will cause more issues with property and liability insurance premiums than any corona virus as this virus is one of many corona and other viruses we’ve had in the past.

My company has made it a lot easier to apply and get approved for life insurance since this virus hit. As of right now, I don’t think the cost of life insurance will be affected until data and numbers shake out. 
My advice to business owners would be to meet with an agent sooner than later and get locked into coverage now if you’re concerned about rising rates. And if you’re in a partnership, protect your family’s interest in your business by ensuring you have a solid buy/sell agreement funded and in place in the event if your death.   

We can’t predict but we can prepare! 

I am of the opinion from what I read in the industry news, that Property & Casualty rates will rise. Mainly due to investment income reduction and due to the cost of re-insurance for the carriers as they negotiate their re-insurance treaties. Some reports state re-insurance increases of 50%. There is also the issue of claims leakage and claims creep that is impacting carriers from hail storms, tornadoes, wild fires, hurricanes and other natural disasters. The pass down to admitted markets might take time due to rate filings and state insurance departments giving approval. The carriers will have to justify the filings for rate increases. Coverage placed in the Excess & Surplus market place could see the increases passed along at any given time and at any given amount due to no regulation by the state departments of insurance. Natural Disasters in 2019 cost carriers $232 Billion and that is expected to be higher in 2020. Add all of this up and the insurance market is definitely headed into a hard market. Just my opinion.

I  believe morbidity (health) premiums will certainly be affected, as part of the numerical rationale used for re-rates from year to year is actual paid out claims experience. We have routinely averaged between 10% to 15% per year in recent years, and would be very surprised if it were to be in that range for 2021, both on the group side, and individual.  

Probably not on health insurance, perhaps yes on life insurance, no on auto insurance.