The current stage of the COVID-19 pandemic has many employers making efforts to begin rebuilding their business operations while also protecting the health and safety of their employees. At the same time, many of their benefit consultants are looking to ascertain the impact this virus will have on insurance premiums so they can devise appropriate solutions.

Although the insurance industry, in general, is prepared for major loss events, the severity and extent of this pandemic will be a first occurrence for many contemporary insurance carriers. The resultant financial impacts on carriers coupled with the expected premium increases will require some time to determine.

Individual carriers will be affected differently too, based on the specific demographics of their insured populations. The number of COVID-19 cases and deaths vary greatly from region to region and carriers with a large concentration of members in virus hotspots like the northeast, for instance, will incur utilization far greater than those with a majority of their insureds located in minimally impacted regions of the country.

Additionally, insurance carriers are impacted in more ways than through the increase of claim payouts. They are employers too and are dealing with many of the same extra expenses other businesses are confronted with as a result of the pandemic. Added cybersecurity costs, outlays for equipment and software to facilitate their employees’ alternative work arrangements, etc. will all complicate their financial picture. Even the downturn in equity markets will affect their expected level of return on their investment portfolio.

Yet, there also may be some offsetting positive influences that develop as a result of the crisis, such as the more widespread use of telehealth services. In addition to providing access to care with lower costs, on a long-term basis this development could allow healthcare providers to extend their reach to more remote or less affluent groups of people to expand access to care and improve overall population well-being.

It is also important to remember that carriers are required to carry specified levels of claim reserves and utilize reinsurance to protect against unexpected losses, both key elements to provide some degree of stability in times like this.

The following are 6 pandemic related factors that will have an influence on premiums going forward.

  1. The extent of virus-related claim costs
  2. Length of the pandemic
  3. Delayed premium payments and coverage cancellations
  4. Number of elective procedures delayed due to virus
  5. Impact of increased use of telehealth services
  6. Whether insurance carriers will need to dip into their reserves and/or receive any federal assistance

In further blog posts, we will expand further on some of these factors.