It feels like COVID-19 has touched every part of our lives, even if we haven’t been personally affected by the virus itself. The effects of the pandemic have permeated our governments, schools, religious gatherings, holidays, and even mundane activities like grabbing lunch.
Did you know that global, national, or local events can have an impact on your insurance policies and premiums?
Unfortunately, the Coronavirus pandemic is no different.
Catastrophes, especially on a national level, can create a market condition called a “hard market”. Natural disasters, political unrest, and now public health crises are all capable of hardening a market.
What is a hard market?
Anytime there is a catastrophe, it causes the number of insurance claims and the amount of money claimed to increase.
Hard market conditions occur when insurance carriers have been impacted financially by an external factor and/or they believe that future events will require significant payouts to policyholders. To deal with strenuus financial demands, insurance carriers raise rates to recover the money they lost. They then maintain these high rates longer than necessary, until they are sure that the national climate has stabilized and they can lower premiums without losing money.
For example, COVID-19 is a virus. That means there was a stiff increase in doctor visits, hospital visits, and ER visits. Each time someone goes to the doctor, they make a health insurance claim for the visit itself, and for each individual test, scan, procedure, etc. administered during those visits.
Therefore, the health insurance industry will harden because of the increase of claims and policyholder payouts.
How does this impact you?
Unfortunately, the ripples don’t stop at health insurance. Employees in some industries can claim worker’s comp if they contact COVID on the job. More generally, circumstances such as the current public health crisis cause safety to be on the forefront of everyone’s mind. This leads to a higher demand for risk management. Combined with the financial strain on the industry, it causes policy prices to skyrocket.
As a business owner, you are concerned with the health and safety of your employees. You also, however, have financial obligations. You need to be able to weigh the benefits of an insurance policy with the costs and choose the right option for your company.
In times like this, when insurance premiums skyrocket, you have to ask yourself if you need to reduce the quality of your plan in order to be able to afford it.
Luckily, there is a third option.
In a hardened market, Group Captive Agencies are less affected by higher premiums than other ways of obtaining risk management.
Group Captives are organizations composed of like-minded businesses from various industries. These companies come together to form their own insurance company. Therefore, the captive is dedicated to the best and most affordable risk management for their members. Because members of a group captives are owners, there is a heavy emphasis on transparency and control.
Group captives, therefore, have a vested interest in the well-being of their members. This means they can leverage their own surplus to mitigate rate increases.
Support from like-minded people who care about each other is the only way to survive the unprecedented nature of our time. Your insurance company should care about you, your business, and your employees. Group Captive is the 2021 risk management solution.