Will COVID-19 have a lasting impact on the property insurance and liability insurance markets?

Will COVID-19 have a lasting impact on the property insurance and liability insurance markets?  


From an insurance perspective, the most significant impact of the COVID-19 pandemic has been to business interruption (BI) insurance, with the industry awaiting the outcomes of several BI test court cases.

While those rulings could have a substantial impact on the Australian insurance market, in the day-to-day world of property insurance and liability insurance, COVID-19’s impact has been mixed.

Miramar Underwriting’s Northern Region Manager, John Goodman, and Liability Product Manager, Dominic Ivory, discuss some of the short-term effects of the pandemic and whether they could result in lasting change.

Property insurance impacts

On the property side, Mr Goodman says that while COVID-19 hasn’t changed the underlying physical assets involved in property insurance, the risk profile of many properties has changed due to their lack of use.

“We’ve had clients that have been affected by losing tenants due to the pandemic, but we’ve tried not to increase premiums if we can avoid it, instead when a property becomes unoccupied we look at what risk management can be put in place.  The pandemic has really heightened our view of what good risk management looks like for unoccupied premises,” he says.

That improvement in risk management could be one of the factors behind why an expected increase in property damage claims due to the pandemic didn’t eventuate.

“There was an expectation that property damage claims would increase, with more premises unoccupied and susceptible to vandalism and other damage, but this did not eventuate.”

However, Mr Goodman says properties remaining unoccupied long-term could pose a challenge for property insurers.

“If businesses that shut during the pandemic don’t start up again, it could leave a higher percentage of unoccupied premises than we have typically seen in the past.  Additionally, the change to workplaces through the flexibility of working from home also creates a risk here, as even businesses that are doing well could downsize their needs in terms of physical working space if enough staff continue to work from home.”

By contrast, he says that warehousing and manufacturing premises have appeared to experienced an uptick in demand driven by the pandemic-fuelled surge in online shopping and increased local production of goods.

“In terms of the long-term impact of COVID on property insurance, both of those factors could play a role but it’s still too early to see how it’s going to play out.”

Liability insurance impacts

On the liability side, an early change that occurred as a result of the pandemic was that endorsements were added to policies to exclude the impact of communicable diseases.

“Many underwriters added biosecurity endorsements to exclude diseases of a pandemic nature,” Mr Ivory says. “That’s a change that I think will stay.”

Mr Ivory says that due to the long-tail nature of liability claims, whether COVID-19 has had any impact remains unknown, however early indications do not point to any significant claims trends.

“A large proportion of claims stem from personal injuries and notably slip and falls. While these losses can take time to develop, with less mobility through lockdowns the expectation is these will reduce through this period particularly in leisure, hospitality and retail settings.”

He says any lasting impact is more likely to be felt from a premium perspective.

“Business turnovers in some segments most impacted by the lockdowns, such as leisure, hospitality and security, reduced significantly, and with reduced turnovers comes a reduced premium pool. Across all occupations we are already seeing turnovers pick up with less restrictions in place, but not all are back to pre-COVID levels.”

However, Mr Ivory says underwriters with the right balance of occupations within their portfolios should be largely insulated, due to the boom experienced by other sectors such as manufacturing, warehousing and delivery services, during the pandemic.

The hard market has also provided further insulation for underwriters that may have been exposed by a reduced premium pool.

“The market remains hard and rates have still been increasing during COVID-19, regardless of falls in turnovers. We’ve tried to work with brokers and insureds to minimise that, but the forces of rating relate to historical portfolio performance, whereas COVID-19 is an anomaly.”

Insurance that keeps businesses moving forward

For more information about the impact of COVID-19 on the property insurance and liability insurance markets, or for an in-depth discussion on how we can help keep your clients moving forward you can call us 02 9307 6600 or email us at property@miramaruw.com.au or liability@miramaruw.com.au.