How COVID-19 Has Impacted the Insurance Industry

How COVID-19 Has Impacted the Insurance Industry

Declared a pandemic by the WHO on March 11 2020, the COVID-19 outbreak has vastly impacted numerous industries at an overwhelming rate. With already over 1 million confirmed cases, the global market has been disrupted with increasing restrictions in place.

It’s important to note a few ways in which the automotive and insurance industry has been affected. It’ll continue to be impacted during this uncertain time of a spreading, worldwide crisis.

Cancelled or Changed Car Insurance Coverage

It’s crucial to note the legal implications of drivers using a car without it being insured, so it’s important that drivers don’t simply cancel their insurance as a means of surviving the crisis.

As more and more individuals are concerned about bills that need paying in a time of limited income, they may consider saving money. To accomodate consumers and not lose clients, car insurance liability coverage limits may be reduced for customers wishing to save on their premiums. Alternatively deductibles can be increased and another possibility is that lowered mileage could result in a discounted insurance rate.

Of course, car insurance companies could be negatively impacted if car insurance payment rates continue to decrease or if car insurance coverage is suspended or completely cancelled. Car insurance companies can charge cancellation fees or other unexpected costs in such circumstances. 

Increased Claims Lead to Increased Car Insurance Rates

Insurance companies accumulate billions of dollars. It’s while this money is being invested as they wait for claims that insurance companies thrive. If international investments and global markets plummet and government treasuries pay less than 1%, car insurance rates will need to be raised. 

Most major economies are predicted to lose a minimum of 2.4% of their GDP value throughout 2020 as COVID-19 cases continue to rise globally. Because the entire economy affects an insurance company’s business, it’s possible that car insurance premiums will be increased. 

Limited Third Party Service Providers

Insurance companies rely on numerous third party service providers. It’s highly possible that operations could be challenged and disrupted in the light of this ongoing pandemic:

  • IT and other support services may experience high volumes of activity as well as internal challenges or vendor issues.
  • While some service providers may continue to operate in high risk COVID-19 areas, others may not be able to work remotely or have limited ability to do so.
  • With travel restrictions it could become increasingly difficult to produce financial reports or track data effectively if car insurance companies depend on other suppliers for this.
  • Due to social distancing restrictions customer service is also being impacted, and insurance companies are trying to implement plans to ensure this isn’t completely disrupted.

Payment Plans and Postponements

Some insurance companies are offering payment assistance at this time, so as not to lose out on customers entirely. They are making it possible for insured persons to have special payment plans, including delayed payments due to the financial limitations brought on by COVID-19.

Cancellations could also be paused when premiums aren’t paid, or custom payment options are given on a case by case basis. 

In Conclusion

This all shows that there are many possibilities for both consumers and insurance companies.

If you’re looking for some guidance regarding your car insurance coverage and policies in the age of COVID-19, it’s best to discuss this with an agent who can help answer your questions. They’ll provide some assurance so you’ll know the next step to take according to your budget and current needs.

 

 

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