As the world opens up more and settles into a new normal, many are still dealing with the impact of the coronavirus (COVID-19) pandemic — including the insurance industry.
Jamie Cox, claims/risk manager, ARA Insurance, Overland Park, Kan., recently shared an inside look at the frequency and severity of insurance claims filed in 2021 and what those mean for the equipment and event rental industry.
Frequency and severity both are used when looking at insurance claim trends. Frequency measures how frequently a type of loss occurs. Severity is a measure of how costly or severe a cause of loss is. This is used to determine the types of claims that cost the most money.
In the interview below, Cox explains the impact the pandemic has had, along with natural disasters. Plus, she takes a look at an emerging trend.
Rental Management: What types of claims did ARA Insurance see the most of in 2021? How did that compare to past years?
Jamie Cox: This year, auto topped the list again for our most frequent claims — specifically auto property damage. To dig in a little deeper, we saw the most claims come in for property damage caused by rear-end accidents. This is why it is important to review proper following distance, distracted driving and driving in inclement weather with your staff.
Rental Management: As the pandemic continues, what impact has that had on the types of claims filed with insurance companies in general and for ARA Insurance in particular?
Cox: Even though small- to medium-sized businesses feel that they are immune to cyberattacks due to the size of their business, the reality is quite the opposite. I have been seeing more and more communication across the insurance industry warning of the potential of cybersecurity incidents and pleading with small businesses to protect themselves. Recently, a survey done by The Identity Theft Resource Center (ITRC) revealed that nearly 60 percent of small business owners have had data compromised, a security breach or both. In addition, the survey revealed that 25 percent of small businesses have had an incident within the past 12 months, and 54 percent experienced a cyber event during the past one to two years. As I write this, I am knocking on wood. ARA Insurance has not experienced an influx of these types of claims, however, I want to caution our members to take the necessary steps to protect themselves. It is my belief that with increased work from home situations, an influx in cybercrime isn’t far away from being the next issue we are dealing with as an industry.
Rental Management: How did people returning to work in offices and traveling for business impact auto claims in 2021?
Cox: Auto claims have consistently been an issue across the board in the insurance world. Year after year we see these types of claims, whether it is for bodily injury or property damage, take over the majority of our losses. In a recent study done by the National Highway Traffic Safety Administration, it was reported that traffic deaths across the country saw an increase of about 18.4 percent in the first six months of 2021. This was the largest number of projected fatalities in that time period since 2006. So even though we saw a decrease in auto losses with reduced road travel during the pandemic, it appears that these behaviors came back full swing in early 2021.
Rental Management: It seems like there were more wildfires, hurricanes and other natural disasters again last year. Does that put pressure on the insurance market, and will that mean an increase in rates?
Cox: Climate change and increased frequency of catastrophic events certainly put pressure on the insurance markets. One example of why we are experiencing rate increases in the industry is because insurers have been conducting portfolio stress tests in which they test their portfolios to climate risk and adjust or rebalance their exposures. What is harder to predict with climate-driven disasters is the stress it will have on the overall economies. These events have systemic effects making the severity greater. Insurers are needing to meet higher capital requirements for reinsurers to address the increasing needs and pressures of regulators, investors and societies.
Protect your business with ARA Insurance
ARA Insurance is the leading insurer of American Rental Association (ARA) members. For more than 40 years, ARA Insurance has worked with customers to develop rental-specific coverages and improve industry safety by investing in risk management initiatives.
Types of coverage offered include:
- Auto
- Cyber Suite™
- Employment Practices Liability
- Insurance (EPLI)
- General & Excess Liability
- Inland Marine
- Property
- Workers’ Compensation
- Data Compromise