The 2020 Atlantic hurricane season still has a few weeks to go, but we’ve already seen record-breaking levels of storm activity during this anything-but-normal year. For communities already struggling with the impact of COVID-19, the effects of a severe storm have been even more challenging. What new claims lessons will be this year’s legacy? While no one has a crystal ball, here are three key issues to watch that are explored further in this video.
Potential change in risk due to property improvements
In some industries, business owners have made significant changes to their properties in recent months to ensure proper air flow and adequate social distancing. This may mean that the risk has materially changed since it was underwritten. If a property is underinsured because of improvements made since the policy’s inception, and there is no coinsurance penalty, or limits are not capped at scheduled values, the insured may seek damages far in excess of what may have been anticipated at the time of binding.
Claims technology advances
Advancements in satellite imagery and drone technology have made it easier to assess damage from a safe distance, which could both reduce in-person interaction and aid in managing claims efficiently. Though the need will still exist for in-person site visits for some losses (in which case proper PPE, social distancing and minimizing interactions are all important considerations), technology may be one way to lighten the load.
Valuation and other damages considerations
Although aid packages from the government and recovery from FEMA are often conditioned upon exhausting private insurance first, carriers will want to satisfy themselves that insureds are not seeking a windfall—that is, seeking to recover for the same damages from multiple sources, often called double recovery. Additionally, given the current economic environment, there is also the question of whether certain insureds will even want to rebuild. Normally, insureds seek to repair the damage and recover the Replacement Cost Value, but in a time when businesses are struggling to stay afloat, some insureds may prefer to “take the money and run.” Whether this will make a noticeable difference in overall payouts remains to be seen, but it certainly seems plausible that more covered claims will be limited to Actual Cash Value than in previous years.