COVID-19 was not declared a pandemic until March 11, 2020. Could there be any impact of COVID-19 on P&C claims incurred in 2019 and prior (in other words, the adequacy of loss and LAE reserves as of December 31, 2019)?
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The short answer is yes. There are many issues arising from COVID-19 that could impact the duration and severity of claims incurred by a P&C insurer on or before December 31, 2019. These include:
- A number of states have issued directives to stay at home; therefore, many courts and arbitration systems are closed, potentially limiting the ability to report claims and affecting an insurer’s ability to settle claims.
- There could exist early settlement opportunities for claims in lines like automobile liability or general liability that otherwise would have been tied up in the court system generating expenses. Claimants could have the immediate need for cash in light of rising unemployment.
- There is the potential for delayed medical treatment and/or physical therapy appointments, potentially limiting an insurer’s ability to improve outcomes for claimants.
- Unemployment has been increasing significantly, limiting the ability for injured workers to return to work.
While not exhaustive, these provide some examples of potential impacts of COVID-19 on unpaid claims as of year-end 2019.
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