As COVID cases in the US begin to tick upwards once again, PCS Head Tom Johansmeyer has warned that a pandemic resurgence could have significant implications for catastrophe claims in the most vulnerable areas.
New daily COVID cases in the US have increased from just over 10,000 last month to around 56,000 as of July 21st, largely driven by just a handful of states.
However, PCS observes that these states are also among the most prone to catastrophes in the country, noting that three of the five states with the largest surges in average daily cases are also the top three for both aggregate catastrophe claims and total industrywide insured losses attributable to catastrophe events since 2000.
With hurricane season having now arrived, and hot conditions in western states stirring fears of more catastrophic wildfires, Johansmeyer says that re/insurers need to be wary about the potential complications of COVID interfering with the claims process.
“Increased COVID-19 transmission and slower progress on vaccination could cause claims to become more expensive and cycle times to increase. And the operational challenges associated with working in an environment with elevated virus risk can be significant,” he cautioned.
Ted Gregory, Director of Operations for PCS, also commented: “The fact that there’s an overlap between the states most prone to catastrophes and those with increased transmission (and lower vaccination rates) should remind re/insurers of the need to remain vigilant.”
PCS believes that insurers responding to a major catastrophe in states such as Florida, California, Texas, Missouri, or Louisiana could face numerous challenges due to measures instituted or social behaviours changed as a result of COVID-19.
For instance, social distancing, reluctance by claimants to allow adjusters inside to inspect, and supply chain impediments caused by the pandemic could result in longer claim lifecycles and increased expenses.
And in areas more affected by the pandemic, municipal offices could experience reduced workforces, which in turn could cause delays in granting permits for rebuilding and building inspections.
Low rates of vaccination in these states also suggests that the risk of increased COVID-19 transmission in states at high risk of catastrophe activity could continue throughout hurricane season, meaning there’s a risk of post-catastrophe remediation further spreading COVID-19.
“As COVID-19 cases tick higher and the rate of transmission appears to be accelerating, re/insurers should keep an eye on rates of infection in catastrophe-prone states, particularly as hurricane season’s peak approaches,” Johansmeyer affirmed.
To prepare for catastrophe response activities, PCS recommends that insurers and independent adjusters revisit thresholds for fast-tracking claims, evaluating drone and other aerial imagery usage, and implementing tools to reduce the need for on-site inspections.
What’s more, faced with a finite amount of field adjusters, the firm advises that companies will need to engage them judiciously to be able to meet the needs of their insureds, should the trend of major events occurring in close succession continue
PCS also urged insurers and independent adjusters to share their ideas and concerns about post-event COVID challenges, such as the availability of personal protective equipment (PPE).
“In addition to ensuring that insurers and independent adjusters have sufficient PPE resources on hand, it may make sense to think through what a major catastrophe event (such as a Gulf of Mexico hurricane) could mean for the availability of additional PPE,” said Gregory. “If an event could result in a shortage, even if only temporarily, having more PPE stored could result in reduced cycle time if a major catastrophe occurs.”