As the coronavirus continues to disrupt every level of daily life for Americans, many have raised concerns about how this will affect their insurance premiums. With the pandemic being a global health crisis, many would naturally assume that they’re going to take a hit on their insurance premiums.
Is this the actual case? We may be able to get an indication of this by looking at how insurers have reacted in some specific regions of the country. For this discussion, it’s quite interesting to look specifically at New York.
Why New York as a Case Study?
New York, early on in the spread of the pandemic through the U.S, was one of the earliest epicenters of COVID-19. By April, it had more than 300,000 cases and registered a peak of more than 11,500 new cases in a day. More than half of these were in population-dense New York City, where health facilities were overwhelmed with so many cases.
While its initial response was slow, eventually, New York came out with measures that helped curb the virus’ spread. Schools and businesses were ordered closed, and residents were issued stay-at-home orders. The governor signed an executive order requiring face masks in public. The state government came out with requirements for reopening businesses, with stringent protocols to follow to ensure public safety.
These measures worked. By June, new cases had gone down to less than 800 a day, and the rate of hospitalization slowed to more manageable levels. By June, businesses and financial markets began to open up again, even while the rest of the country started experiencing surges in cases.
New York is “ahead of the curve,” going through all the phases of the pandemic and modeling what recovery could look like. By looking at what moves insurers in the state are making, we may see a model for what will happen to the rest of the country.
What insurers in New York are Doing
Insurers in New York have already been setting premium rates for the following year. The New York State Department of Financial Services has made these applications by insurance companies publicly available so that the public (i.e., their customers) can comment.
A look through these applications shows a trend of increased premiums by 2021. While you could argue that premiums should go down because most people are skipping their visit to a doctor if their condition isn’t severe or COVID-19-related, insurers believe that the trend will reverse by next year– the principle of “pent-up demand.”
Insurers are betting that people not going to the doctor now in fear of getting exposed to the virus are going to end up going to the doctor by next year.
One of the biggest providers, Fidelis Care, is looking to increase its premiums by 18.8%, citing “increased risk and uncertainty associated with the pandemic.” Other health insurance providers have followed suit, with increases ranging from 1.5% (Excellus) to 19.1% (Oscar) for individual market health insurance.
What This Means for the Rest of the Country
With the rest of the country now undergoing their own surges and are putting measures in place to combat the spread, we’re likely to see a fall-off of cases (depending on how aggressively the state governments address the problem).
And we’re likely to see a similar scenario happening in these places as well. Even with health and life insurance providers in relatively-less-impacted states like Utah, Wyoming and Alaska will probably put in proposed increases to their premiums by next year.
The amount of increase, however, will depend on many factors. It will depend on how quickly a state can flatten the curve, or how many total cases, deaths, and claims these companies will have to cover. In a situation as volatile as this one, making forecasts is a challenge. The future is hazy, but we’ll be on the lookout for developments and trends as they happen.