The Coronavirus’ Effect on the Insurance Industry

The Coronavirus pandemic had profound effects on the insurance industry. A combination of health concerns and shelter-at-home orders in countries around the world brought many industries and companies to a temporary standstill, which spurred “business interruption insurance” claims against insurers. Insurers were also hard hit by claims from businesses that cancelled events (event cancellation insurance) or those that were unable to operate at pre-pandemic levels. Life insurance claims also rose due to the Coronavirus-related deaths. In addition, insurance underwriters faced increased claims for workers compensation insurance (which covers injuries to employees), including claims from health care workers and first responders who became ill on the job. These problems within the insurance industry were significant but generally subsided over time.

Health insurance claims for elective surgery as well as non-emergency visits to doctors, dentists and clinics plummeted temporarily, due to concerns about spread of the disease. This helped offset insurers’ growing costs of COVID-related care.

Interestingly, life insurance sales soared during the height of the COVID crisis. Consumers of all ages were clearly concerned about their mortality and risk during the early days of the pandemic. Another issue initially was soaring unemployment, which meant that millions of workers lost their employer health coverage. Meanwhile, in the U.S., the federal government dramatically expanded the availability of Medicaid (government-sponsored health coverage that is aimed at lower-income segments of the population.)

By 2022, the insurance industry was largely back to business as usual. Significantly, the unemployment rate was down to extremely low levels. Most people who wanted a job could find one, and many were thus covered once again by corporate health plans.

During the midst of the pandemic, relocations and housing sales soared, leading to extremely high levels of new homeowners’ insurance policy applications. By late 2022, this activity plummeted, as rapidly rising interest rates cut into home sales in a big way.

Insurance underwriters depend on their investment income for a large part of their net income. That is, the funds that they receive from insurance premiums are invested by the billions of dollars until they are needed to pay claims. Shaky stock and bond markets post-COVID harmed this income stream.

Of significance, insurance underwriters, brokers and agencies are in a cost-control mode. Inflation has caused costs, including wages, to rise rapidly. At the same time, inflation has driven up the cost of paying out many types of claims, such as automobile damage from wrecks, or reconstruction after a home or building fire. Health coverage costs continue to rise, and patients are back to visiting their doctors and electing surgery at a normal rate. Insurance firms will be balancing their needs to provide services and continue their marketing, with a desire to keep costs under control.

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