The world is focused on COVID19, as it should be. However, while you, your family, and the national media are understandably paying attention to people’s health and the government’s response to the pandemic, many lobbyists are using this opportunity to appeal to politicians to change or create regulations to benefit their industries. We want to highlight some of these efforts that aren’t getting the attention they deserve because we should all still be aware of what is happening behind closed doors when the world is focused on other pressing things.
Today’s entry is a little closer to the pandemic. As reported by Roll Call, a group of insurance advocates sent a message to Congress alerting them that insurance companies are not financially structured to survive an emergency like the current pandemic. This was in response to Reps. Cisneros and Thompson’s request that the California Insurance Commission enforce business interruption clauses for small businesses after many insurance companies refused to do so (clauses that are included in insurance contracts to help business in the event of an emergency).
“Insurance coverage works by spreading risk, but that model simply cannot account for a situation in which losses are catastrophic and nearly universal…Standard business interruption policies do not, and were not designed to, provide coverage against communicable diseases such as COVID-19, and as such, were not actuarially priced to do so.”
This brings up a couple questions:
- If insurance companies are not expected to honor their agreements in the event of a crisis, are American families and small businesses expected to? If a business suffers a major financial crisis and can’t afford their insurance premium, do their insurance companies still provide coverage despite the lack of payment?
- If insurance is all about spreading risk, and if families and businesses have to plan for the risks of emergencies to still pay for their insurance cost (insurance that is designed to help them in times of crisis), shouldn’t health care companies have to prepare for risks too?
- Does the industry’s rationale apply to all areas of insurance. In the event of a major earthquake, are providers of earthquake insurance allowed to say that their policies “simply cannot account for a situation in which losses are catastrophic and nearly universal”?
- Are American families and small businesses better equipped to plan for emergencies than insurance companies? It’s worth noting that the health insurance industry alone (not the entire insurance industry, just the health sector) makes more revenue in one year than Facebook, Amazon, Apple, Netflix, and Google combined. (from Axios)
The group stated in their April 2 letter, “It is worth noting that recent estimates show that business continuity losses just for small businesses of 100 employees or fewer could amount to between $220 billion to $383 billion per month. Meanwhile, the total surplus for all of the U.S. home, auto, and business insurers combined to pay all future losses is only $800 billion.”
The letter to Reps. Cisneros and Thompson was signed by the American Property Casualty Insurance Association, Council of Insurance Agents and Brokers, Independent Insurance Agents and Brokers of America, National Association of Mutual Insurance Companies, and the Reinsurance Association of America.