What's New With Insurance--2020

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Jul 23, 2020
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Insurance, Current Events

Auto Insurance

Undoubtedly, people are driving less during the pandemic. Logic would suggest you should be paying less for your auto insurance. Many companies pro-actively decided to send their policyholders’ rebates or credits for lower usage early on in the pandemic (April and May). (Check out Consumer Reports for a list of what their twenty top-rated companies are doing.)

But you should not be satisfied with just those rebates. Several recent articles suggest you call your insurance company/agent and negotiate a lower rate. Here are coverage items you could consider changing (just be sure to change them back if/when your driving returns to pre-pandemic levels/uses.)

  • Lower the mileage estimates for each car to reflect your new reality.
  • If you are no longer using your car to commute (working from home or unemployed), drop it from “business” to “personal” use.
  • If you are having trouble affording your car insurance, you could try to increase the deductibles to lower the price.
  • If you are REALLY in dire straights, you could drop coverage on a car you aren’t driving, but be careful—this would eliminate coverage for vandalism and theft.
  • BE WILLING TO SHOP AROUND FOR A NEW POLICY! (and be willing to leave your current insurer).
  • DON’T LET YOUR INSURANCE LAPSE!

According to a ValuePenguin report, 31% of consumers asked for some help from their auto insurance company, and 80% of those who did were successful. Many insurance companies, on their own or at the direction of State Insurance Authorities, have deferred premiums and halted cancelation of policies for customers who are in financial straights as a result of the pandemic. Remember that deferred payments will eventually have to be paid, and definitely negotiate a lower rate/shop around! (Money.com) (Insurance Business)

 

Health Insurance

As of May, it was estimated that at least 27 million people were newly uninsured after losing their employer-sponsored health care. These people had three (four) options:

  • go to the ACA marketplace (Healthcare.gov)
  • they might qualify for Medicaid (CHIPS for children)
  • COBRA
  • (remain uninsured)

A Kaiser study indicates that 8 of 10 newly uninsured people would likely qualify for some form of (subsidized) insurance, either from a private firm on the state exchanges (ACA) or through Medicaid, but received no information about this.with either their unemployment filing or with their stimulus checks. The kicker is that there is a 60-day window to sign up for ACA coverage after a change in employment status.

For those that were insured through work from a qualifying company, COBRA might be an option to get coverage if an unemployed person could not move to a spouse’s plan. COBRA allows you to stay on your existing plan, but will no longer be subsidized by your employer, and premiums are usually REALLY expensive. You had 60 days to decide if you wanted coverage, and could wait it out to see if you needed it before getting either a new job or new coverage. But this spring, the a new rule was issued amending the Federal law, greatly expanding that 60-day window. It now states that a person would have 60 days from the date the government determines we are no longer in a national emergency due to Covid 19. This allows someone to wait it out much longer.

Here are two quick legal items that may be important to know related to health insurance:

  • The Trump Administration asked the Supreme Court to overturn the Affordable Care Act. This issue is not yet on the Supreme Court’s schedule. If the ACA were to be overturned, Covid survivors, certainly those with resultant permanent health issues, would fall into the “pre-existing conditions” category and could be denied coverage by insurance companies on that basis.
  • A divided federal appeals court on Friday upheld the Trump administration’s expansion of cheaper short-term health insurance plans, as an alternative to the Affordable Care Act’s costlier comprehensive insurance, from 3 to 12 months. These plans do not have to cover people with pre-existing conditions, nor do they provide basic benefits like prescription drugs.

 

NPR, CNN, AP News, NPR2, The Guardian, APNews 2

 

Life Insurance

Has the life insurance business changed with Covid? Nerd Wallet answers this question based on what is known as of now. Here are the key takeaways.

  • If someone with an existing life insurance policy dies from Covid, the beneficiary will receive the payout. (Existing policies cannot be changed and must be fulfilled.)
  • If you get Covid, you will not be able to apply for a new life insurance policy unless/until you recover. (What is less clear if the premiums would be different.)
  • If you are healthy, the process of getting life insurance will be different and likely delayed.
    • Your travel history/plans will be considered to see if they include high risk areas.
    • Medical exams may be delayed, and it may take longer to get any required medical records.
  • If you are having trouble paying your premium, you should contact your insurance company to see if they can extend your grace period beyond the customary 30 days.

 

Pandemic Insurance

Yes, there is such a thing! And pandemic insurance will save the All-England Lawn Tennis Club from financial ruin after cancelling the 2020 Wimbledon tournament. The Club’s risk committee has insisted on buying this insurance every year. This illustrates exactly why you pay for insurance for something you hope never happens! The Royal & Ancient Golf Club carries similar insurance for their Golf Open.

What about other sports or businesses? Most of them have a “force majeure” clause in their contracts, which would cover natural disasters, but not a global health crisis. But there is a warning to those looking to purchase pandemic insurance in the future now that we are actually experiencing one, and the costs look to be enormous. Pandemic insurance may be impossible to get, at least for awhile, and it is likely to be ridiculously expensive. In fact, Wimbledon has been unable to get pandemic insurance for the 2021 tournament. (ESPN) (CBS)

There is something called business interruption insurance, but after the 2002-2003 SARS outbreak, most insurance companies tightened up the wording on these policies to exclude pandemics. However, there is much litigation in the works to get some payout on these policies, for example, equating a public health emergency closing to a natural disaster. And there is political pressure on Property and Causalty insurance companies to let go of some of their huge ($822 billion) cash reserves. Which types of business and personal policies will pay out for Covid? Things like event cancellation or trip cancellation insurance.  WAPO

The LAist goes into great detail about the cases being brought by a large group of California restaurants against their insurance companies, if you are interested in digging in.  The ultimate judicial rulings in these California cases could set the stage for payouts/cases across the country.

The Insurance business is fluid and creative, and has responded to the Covid pandemic by coming up with all sorts of new coverage products to address new needs. This might include helping businesses cover the costs of physically adapting to social distancing, car insurance for all the new gig workers making deliveries, or lost income coverage for any reason (really expensive!) Reuters

About the Author

Beth Tallman

Beth Tallman entered the working world armed with an M.B.A. in finance and thoroughly enjoyed her first career working in manufacturing and telecommunications, including a stint overseas. She took advantage of an involuntary separation to try teaching high school math, something she had always dreamed of doing. When fate stepped in once again, Beth jumped on the opportunity to combine her passion for numbers, money, and education to develop curriculum and teach personal finance at Oberlin College. Beth now spends her time writing on personal finance and financial education, conducting student workshops, and developing finance curricula and educational content. She is also the Treasurer of Ohio Jump$tart Coalition for Personal Financial Literacy.