Getting Sick Without a Struggle: New Pandemic Insurance?

It’s strange but likely accurate to say that COVID won’t be the only pandemic many business owners will experience in their career. With such levels of interconnectivity in the global economy, it might become a more common experience to see businesses close for a year while society weathers some transmittable illness. Fortunately, it appears that members of the Senate have learned something from dealing with COVID, and there’s already discussions about how to handle the situation experienced during 2020 in future years.

It’s way too soon to get into any specifics about what laws could change, but it’s never too early to learn about what ideas are being discussed and what could grow into something that takes form as actual public policy. For New Jerseyians this is particularly pertinent, as our own Sen. Menendez is the chair of the Senate subcommittee looking into such solutions. It’s one of those instances where your voice could have a particular weight in charting the national policy.

What’s Happening with Pandemic Insurance Payments?

On July 22, in the Senate subcommittee on securities, insurance and investment, there was a hearing titled “Examining Frameworks to Address Future Pandemic Risk.” This hearing discussed the potential response of both government and private insurance during future pandemics. The failure of private insurers was discussed, and whether something needs to be done to compensate business owners whose policies failed to pay during 2020.

While the discussion was arguably focused on the future, it required frequent references to recent lackluster consumer experiences with the private insurance industry’s response to 2020.

I believe it will be difficult for this subcommittee to conclude that policyholders got ripped off, and do nothing. This is not something you should expect in the next week or even the next couple months, but for anyone that had an COVID-related insurance claim denied, keep up your hope. At some point in the future you might hear about legislation that pays out or forces insurers to pay out claims denied during COVID closures.

What Percentage of Business Owners’ COVID-Related Insurance Claims Were Rejected?

82% of the 8 million claims across the country were denied by insurance carriers making this a widely shared experience across the country. This extraordinarily high denial rate gives weight to the idea that a system needs to be created to deal with this situation in the coming years.

It’s also this extremely-high denial rate that lends credence to the idea that policyholders got ripped off. Many denied business owners feel that this isn’t an instance of poor planning on their part, rather they feel they were abandoned by their insurers just when they needed them most.

One NJ developer/restaurateur testified that she was shocked that her 12-month business interruption insurance didn’t cover any of the closures she experienced in her multiple restaurants. It’s safe to say she’s more well versed in business insurance than the average person, and even she experienced a difficult financial hit when the insurance system failed to support her during COVID closures.

This discussion is just in its infancy, so I don’t have much to detail beyond “yeah, they’re talking about it,” but for anyone who’s claim was denied and they feel it was a slippery situation, take hope.

Sharp will keep an eye out for any developments of these discussions, as both of them have the potential to affect business owners throughout New Jersey and the nation.

What Did the Federal Government Do to Relieve Businesses During COVID?

In 2020, several emergency bills were quickly written and signed into law to prevent complete economic ruin for many businesses; these programs include the PPP, the EIDL, EFML and many others.

The subcommittee is asking if anything can be done to preemptively combat this risk instead of rushing to throw together a bouquet of emergency legislation once the problem is down on you.

What Happened in this Subcommittee?

Evan Greenberg, CEO of Chubb, an international insurance corporation, testified and suggested the idea of a public-private partnership between the US government and Chubb to create a national insurance program that would protect business owners against the losses experienced during this recent pandemic.

Other voices like Robert Hartwig, Direction of the Risk and Uncertainty Management Center at the University of South Carolina, questioned if the development of new programs was really necessary. He noted that many of the programs unveiled this year were done so under duress, and that they could be substantial enough to handle future pandemics without the need for another national insurance program.

What Are the Outcomes of This Conversation

As noted by Sen. Menendez, the conversation on this topic will continue. What this conversation tries to answer is who’s responsible for helping care of business owners who suffer financial losses as the result of a pandemic. Is it their responsibility to insure themselves? Is there a greater need for government involvement to fill in the gaps of the private insurance market? There are passionate voices representing both sides, but I feel that some form of national pandemic insurance is going to win out eventually. When will that happen? That’s way too early to tell and will depend on the political winds of the moment it’s rolled out.

It may be too much to ask for immediately after getting a huge infrastructure and tax plan passed, so this could be something that’s handled a year from now or at the beginning of another democratic term. Any way it turns out, we’ll keep clients informed of laws that could affect their financial situation.