PCS highlights potential for US COVID-19 clash

COVID-19 remains a potential issue for catastrophe response in the United States, according to Property Claim Services (PCS), which could have significant implications for (re)insurers covering US risks.

In the US, it pointed out that average daily cases reached 30,702 (based on a seven-day average) on 17 July, 2021, according to data from the New York Times, representing an increase of 126% over 14 days. A handful of states appear to have driven most of the increases – states which are also among the most prone to catastrophes in the country.

PCS evaluated the states with the greatest recent increases in average daily COVID-19 cases alongside their historical catastrophe activity. 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.

It found that Texas, Florida, and Louisiana are generally exposed to both tropical storms and severe convective events. Missouri is among the top ten states according to PCS for aggregate catastrophe claims since 2000, and it’s twelfth for total industrywide insured losses.

California may not rank as high in terms of total catastrophe claims, but wildfire activity since 2017 has led to a significant increase in the state’s rank in total industrywide insured losses as measured over the past 20 years.

A major catastrophe impacting Florida, California, Texas, Missouri, or Louisiana could be complicated by measures instituted or social behaviours changed as a result of COVID-19.

Social distancing, reluctance by claimants to allow adjusters inside to inspect (or vice versa), and supply chain impediments caused by the pandemic could result in longer claim lifecycles and increased expenses.

According to PCS, 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.

It suggested that low rates of vaccination in these states (with California the only one over 50%) suggest that the risk of increased COVID-19 transmission in states at high risk of catastrophe activity could continue throughout hurricane season. This also means that there’s a risk of post-catastrophe remediation having the potential to further spread COVID19 compared to states with higher rates of vaccination, according to PCS.

The firm said that to prepare for catastrophe response activities which are made more difficult by COVID-19, insurers and independent adjusters can:

  • Review and test capabilities for remote adjusting: this can include revisiting thresholds for fast-tracking claims, evaluating drone and other aerial imagery usage, and implementing (or at least piloting) tools like ClaimXperience, which can reduce the need for on-site inspections of residential and some small commercial claims.
  • Take a look at personal protective equipment (PPE) access: 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.
  • Strategic use of resources: there is a finite amount of field adjusters, and 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.
  • Talk to each other: catastrophe response preparation benefits from communication almost as much as it does anything else. Insurers and independent adjusters should share their ideas, concerns about post-event COVID-19 challenges, and steps being taken to prepare for a more complicated claim-handling environment.

Finally, PCS suggested that increased COVID-19 transmission and slower progress on vaccination could cause claims to become more expensive and cycle times to increase, adding that “the operational challenges associated with working in an environment with elevated virus risk can be significant. 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”.

California may not rank as high in terms of total catastrophe claims, but wildfire activity since 2017 has led to a significant increase in the state’s rank in total industrywide insured losses as measured over the past 20 years.

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