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Insurers, brokers and commercial buyers are adapting to the challenge of negotiating and completing insurance policy renewals while working remotely and avoiding close contact amid the COVID-19 pandemic.
In a business that thrives on personal relationships, firms and employees are leaning harder on technological tools such as teleconference and videoconference services to complete deals.
Tasks such as underwriters’ site visits, however, largely have been put on hold, market participants say.
In addition, the crisis is complicating existing contracts as some policyholders seek partial premium repayments as business operations are reduced or shuttered, and some with existing business interruption claims will likely face lower claims payments as they factor in the effect of coronavirus-related losses on their revenue, experts say.
The pandemic and the resultant government-ordered and voluntary shutdowns hit the insurance and risk management sector amid the busy spring renewal season, with numerous insurance and reinsurance contracts affected.
April 1 renewals in the U.S retail commercial market include a host of property/casualty and specialty lines, said Christopher Lang, global placement leader U.S. and Canada for Marsh LLC in New York.
“The April 1 renewal date is a very busy date,” Mr. Lang said, adding that negotiations and the process are “moving along as if we were in the office.”
“Remote working is OK for the negotiating side of our business,” said Joe Peiser, New York-based global head of broking for Willis Towers Watson PLC, adding that such negotiations, transactions and renewals are “working pretty well,” with more people turning on the video capabilities of FaceTime and Skype when they talk with clients or business associates.
Penni L. Nelson, assistant vice president of risk management at Hillwood Co. LLC, a real estate development division of Perot Investments Inc. in Dallas, is negotiating May 1 property/casualty renewals and June 1 aviation renewals.
Applications and submissions are being completed on time, but the lack of personal contact affects the process, she said.
“Technology is great, and we are certainly utilizing it more than we ever have,” but it doesn’t replace “that face-to-face, true body language relationship that you have with your underwriters. That being said, we are all doing what we can under the circumstances,” she said.
Ms. Nelson traveled to Bermuda earlier this year as part of her excess casualty renewals, which helped secure capacity in the hardening market, but her trip to London and Zurich scheduled for this week to meet with aviation underwriters was canceled due to coronavirus-related travel restrictions, she said.
April 1 reinsurance renewals negotiations are also proceeding despite the disruption, said Steve Levy, CEO for the reinsurance division of Munich Reinsurance America, a Princeton, New Jersey unit of Munich Reinsurance Co.
“Reinsurance negotiations have been progressing relatively smoothly despite most clients and brokers working remotely,” he said. “Everybody involved has adapted to the situation remarkably well.”
London market renewals also are continuing after Lloyd’s of London closed its underwriting room on March 19, said John Eltham, head of commercial strategy and performance at Miller Insurance Services LLP.
Internally, Miller holds virtual meetups and happy hours to maintain company camaraderie, and, externally, it is using the London Market’s electronic placing platform, known as PPL, and other systems to place business, he said.
“PPL has really come to the fore and is making one heck of a difference,” Mr. Eltham said.
Miller saw its use of PPL increase by 50% in the week it moved to remote working, he said.
Looking forward, the crisis will likely stimulate more use of electronic placements in London after the pandemic subsides, Mr. Eltham said.
Increased use of technology for placement during the pandemic could be followed by greater use of technology for claims processing, said Jamie Yoder, president of Chicago-based Snapsheet Inc., which automates auto claims.
Most people operate as they always have with commercial claims “and as you come out of this you are going to have this giant backlog of claims because everything is shut down,” he said.
Less than 10% of commercial auto claims are handled digitally. but more than 70% could be processed virtually, Mr. Yoder said.
One part of the underwriting process that has been largely suspended during the pandemic is site visits.
“Getting out for site visits and engineering visits is difficult if not impossible,” said Mr. Lang of Marsh. “What we’re seeing is underwriters showing a willingness to underwrite based on information available, using collected information, and then if audits and/or other site inspections need to occur once we’re able to travel a little more freely, we’ll do audits and reviews at that time.”
Underwriters and others are turning to technology in some cases while site visits remain impossible.
“People are using whatever tools they can to look at properties when it comes to renewals, like Google Earth and drones, but we do have a problem with engineers being able to inspect plants around the world,” Mr. Peiser said.
FM Global has suspended many site visits during the pandemic but is using videoconferencing to communicate with policyholders and is contacting policyholders with questions from engineers, said Jeffrey J. Beauman, vice president-chief underwriter at the mutual property insurer in Johnston, Rhode Island.
“The sites that may have been scheduled to have been visited in May or June will get the phone call from the engineer and, depending on what’s going on with that client’s business, we may ask for some additional information that we may otherwise not have asked for,” he said.
For example, a hospital might be asked how it is dealing with an influx of patients, and companies with vacant properties may be asked what additional security measures they are taking, Mr. Beauman said.
FM Global is also talking with policyholders with cash-flow concerns as a result of lost business about rescheduling premium payments, he said.
But “the larger discussion is less about the specific timing of paying an invoice and more to making sure that the client and us are aware of how their business may be affected and primarily how their values may be changing,” Mr. Beauman said.
Brokers also are helping clients deal with potentially massive changes in business levels and exposures in the middle of policy periods, said Robert Meyers, senior vice president, property/casualty leader at USI Insurance Services LLC in Valhalla, New York.
“We’re dealing with clients that have been significantly impacted by the virus,” Mr. Meyers said. “We are working with our carrier partners to give them 30 days’ extension on payments before (notices of cancellation) are issued. Is there a need to do a mid-term cancellation and rewrite because the exposure has changed so dramatically? All of these conversations are going on right now.”
“For mid-term, clients want to see return premiums because their exposures are way down,” Mr. Peiser said. “Insurers are taking everything into consideration on a case-by-case basis.”
For renewals, “clients are dramatically changing their exposure information, such as business interruption values and payrolls, which are dropping,” Mr. Peiser said.
The change in exposures will also affect existing claims, said Kevin Grudzien, managing director at Pyxis Group LLC, a Chicago-based forensic accounting and consulting firm.
For example, a company with an existing business interruption claim dating from before the pandemic could see lower claims payments from insurers in the next several months if it operates in a sector hit by business slowdowns and closures, he said.
“If you have a company that you thought was going to do $2 million this month in revenue, all of a sudden they are down to $1 million, and that’s what these policies base the calculation on,” Mr. Grudzien said.
Major business interruption claims are generally updated on a monthly basis, he said, adding, “I don’t think that has hit home with anyone yet.”
Change in use
Changes in the use of buildings during the pandemic also need to be considered, said Gigi Norris, San Francisco-based co-leader of Aon PLC’s infectious disease taskforce.
For example, some state and local governments are looking to use hotels and other hospitality venues as makeshift health care facilities, quarantine quarters and accommodations for the homeless, she said.
The venue owners need to review the change in their liability exposures when the properties are used for nontraditional functions, Ms. Norris said.
“Review who is liable for what and make sure you have appropriate agreements with whomever you are partnering, carefully consider exposure to health professional liability and make sure you inform underwriters on all lines of insurance about any material change in risk,” she said.
Hospitality venues should also consider their reputational risks, Ms. Norris said.
“Some hotel operators might be concerned that the perception of the venue will be tainted, and people will stay away,” she said. “That’s a risk but you can flip that script and say this is a positive thing” and highlight how hotel owners are helping during the crisis, she said.
More insurance and risk management news on the coronavirus crisis here.