Insurance adjusts to the ‘new normal’

Insurers are adjusting the risk models that inform premium pricing as COVID-19 erases what risk models consider “normal.” As a result, consumers are saving upwards of 15% on their insurance premiums. Some auto insurers are now giving back recently paid premiums and allowing consumers to suspend their insurance coverage given the shelter in place orders. The upside for some insurers, through this pandemic, is the reduced number of claims being filed in certain business lines — but will it be enough to mitigate the broader impacts to be seen? See our takeaways on market chatter below:



  • RLI expects significant adverse impacts on business lines supporting “passenger transportation, nonessential and international cargo haulers and the energy sectors of the economy”.
  • Travelers, Global Life, and RLI foresee a negative impact to premium volumes.
  • Aflac and RLI warn there may be increased costs related to their claims; RLI attributes it to cost of remote operations, and AFLAC to customers’ inability to make payments.


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Here are the highlights. [Note: We are updating this post and our compilation post to reflect the most recent commentary. Last updated 4/23]

Globe Life (8K – 4/22)

“The Company did not incur material claims or significant disruptions to the business for the three months ended March 31, 2020.
However, we do foresee some adverse impact to near-term sales activity, premium, policy benefits, and regulatory capital, although the full extent to which COVID-19 impacts financial results remains uncertain as of the date of this earnings release.”

Fidelity National Financial (PR – 4/22)

“Given the spread of the pandemic and the broad shelter in place orders issued by state governments, we have seen a decline in refinance and purchase orders thus far in the second quarter and expect orders to continue declining as we work together as a country to control the spread of COVID-19.”

RLI (Q1 2020 Earnings call – 4/22)

We realized growth across all of our major product lines, except transportation. Because a large number of our passenger transportation customers are unable to effectively operate under the shelter in place orders, we allowed our customers to suspend coverage for all vehicles they were not using and returned a premium to them.”

We believe there will be revenue consequences as a result of the economic shutdown. The timing and amount of the impact will be dependent on the economic recovery. It is too early to quantify the rate of any revenue deceleration. For RLI, the lines that will be significantly impacted will be those products supporting the passenger transportation, nonessential and international cargo haulers and the energy sectors of our economy, which will be felt by about 15% to 20% of our portfolio. Many other underlying industries will be affected over time as exposure basis are tied to revenue, payroll, values insured and construction projects or other obligations undertaken. On a more positive note, we have several product lines that may see little to no impact, including our personal lines products, management liability products and property businesses.

Travelers (10Q – 4/21)

We expect that the impact of COVID-19 on general economic activity will negatively impact our premium volumes. We began to experience this impact in March 2020 and expect it to persist and be more significant in the second quarter of 2020. We also expect this impact will further persist for the remainder of 2020 and beyond, but the degree of the impact will depend on the extent and duration of the economic contraction. As a result of the anticipated impact of the pandemic on our earned premiums, we expect an increase in our underwriting expense ratio in the near term.

“Earned premiums in the first quarter of 2020 were negatively impacted by a reduction in the Company’s estimate of ultimate audit premiums receivables, including the effect of COVID-19 and related economic conditions.”

“However, because exposure is a component of renewal premium change and given the uncertainty of the impact of COVID-19 on economic activity and, therefore, insured exposures, which will vary by line of business, the Company is not providing an outlook for renewal premium change.”

As a result of the uncertainty associated with the potential impacts associated with COVID-19 and related economic conditions on the Company’s earned premiums, fee income, claims and claim adjustment expenses and general and administrative expenses for the remainder of 2020, the Company is not providing an outlook for these measures.”

We have incurred, and expect to incur in future periods, higher claim and claim adjustment expenses in certain lines of business as a result of COVID-19 due to increases in frequency and/or severity of claims. For example, we may experience elevated frequency and severity in our workers’ compensation lines related”

WR Berkley (Q1 2020 Earnings call – 4/21)

Pretax underwriting income of $52 million was adversely impacted in the quarter due to a provision of $66.5 million for COVID-19-related losses. This compares with $90 million for the prior year underwriting income. The reported combined ratio was 96.9% in 2020 compared with 94.3% in 2019. Catastrophe losses contributed largely to this increase with 5.2 and 0.8 loss ratio points in comparable periods. COVID-19 contributed 3.9 loss ratio points to the first quarter 2020 catastrophe losses.”

RLI  (8K – 4/21)

The global COVID-19 pandemic has resulted in and is expected to continue to result in significant disruptions in economic activity and financial markets. COVID-19 has directly and indirectly adversely affected the Company and will likely continue to do so for an uncertain period of time. The cumulative effects of COVID-19 on the Company, and the effect of any other epidemic, pandemic or public health outbreak, cannot be predicted at this time, but could include, without limitation:
Reduced demand for our insurance policies due to reduced economic activity which could negatively impact our revenues,

  • Reduced cash flows from our policyholders delaying premium payments,
  • Increased costs of operations due to the remote working environments of our employees,
  • Increased claims, losses, litigation, and related expenses,
  • Legislative, regulatory, and judicial actions in response to COVID-19, including, but not limited to, actions prohibiting us from cancelling insurance policies in accordance with our policy terms, requiring us to cover losses when our policies did not provide coverage or excluded coverage, ordering us to provide premium refunds, granting extended grace periods for payment of premiums, and providing for extended periods of time to pay past due premiums,
  • Policyholder losses from COVID-19-related claims could be greater than our reserves for those losses,
  • Volatility and declines in financial markets which, in response to COVID-19, has reduced, and could continue to reduce, the fair market value of, or result in the impairment of, invested assets held by the Company, and
  • the decline in interest rates which could reduce future investment results.

Travelers (Q1 Earnings Call – 4/21)

“As a company, we are also grateful to be in a position to support those impacted by COVID-19, including through customer billing relief, our stay-at-home auto premium credit program, our distribution support plan, accelerating the payment of more than $100 million of commissions for agents and brokers and a direct $5 million pledge to assist hard-hit families and communities. This pandemic has created a tremendous amount of uncertainty for all of us. Nonetheless, let me turn to highlighting some of the potential impacts of COVID-19 and the macroeconomic environment on our business.”

With respect to COVID-19, these claims will most likely be applicable in the case of health care workers and other first responders, which does not represent a significant part of our book of business. Some states have taken steps to effectively expand the scope of workers’ comp coverage by creating presumptions of compensability. Other states are considering doing the same. There are a few dynamics to this that argue for policymakers and regulators to take a careful approach.”

Roughly half of the improvement reflects the continuation of the lower claim frequency levels we had already been observing, while the other half is associated with a decrease in miles driven as a result of COVID-19 and related economic conditions. To add some texture to the impacts of COVID-19, data from our telematics program, which we call IntelliDrive, indicates a fairly rapid decline in miles driven per day during the latter part of March, resulting in an average decrease of more than 40% in miles driven for the second half of the month. “

Erie (Annual shareholders meeting – 4/20)

“The strong capital position of both the Exchange and Indemnity puts us in an enviable position as we face the new challenges presented by the COVID-19 pandemic in 2020 and beyond.”

“The customer care operations team has been experiencing a higher volume of more complex calls from customers who have been affected by the pandemic.”

“In that spirit, we took action recently to provide additional financial relief to our customers. First, across our footprint, we are making the necessary filings to reduce our rates for our personal and commercial auto insurance customers, saving them an estimated $200 million. Along with reduced rates, Erie agents are adjusting coverages to reflect reduced risk, also lowering premiums. Additionally, our agents and customer care teams are working with individual policyholders to extend flexibility in billing and payments.”

Progressive (8K – 4/15)

“During March, we began to experience the impact from the social distancing and shelter-at-home restrictions that were put in place in response to COVID-19. Net premiums written, losses and loss adjustment expenses (LAE), and underwriting expenses experienced the most significant changes during the month

The year-over-year reduction in net premiums written for the month reflects decreases in both new applications and average written premiums per policy, as well as the $110.5 million reduction in our transportation network company business net premiums written discussed on page 5. Compared to the same weeks in the prior year, for the first week of fiscal March, which was prior to the implementation of the COVID-19 restrictions, our personal auto new application growth was over 2%, while new auto applications decreased about 23% for the last three weeks of the month, which was after the COVID-19 restrictions were in effect.”

“The companywide loss/LAE ratio for March was 16.3 points lower than the ratio reported on a year-to-date basis through February 2020. For the month, the incurred losses and LAE reflect the decrease in auto accident frequency that we experienced as a result of the COVID-19 restrictions, and were in part offset by $103 million of reserve increases based on actuarial analysis of the ultimate costs of claims incurred through the end of the month.”

Mercury General (8K – 4/10)

“Recognizing that the COVID-19 crisis has altered driving patterns, resulting in fewer accidents and claims, Mercury Insurance today announced the company would be giving back 15% of monthly auto insurance premiums to customers in April and May.”

Aflac (8K – 3/20)

As a result of the COVID-19 pandemic, we may also face increased costs associated with claims under our policies, an increased number of customers experiencing difficulty paying premiums or policies being designated as “no lapse” for periods of time. The cost of reinsurance to us for these policies could increase, and we may encounter decreased availability of such reinsurance.”


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