Property and casualty (P&C) insurers will have to change many of their ways of doing business to survive through and after the COVID-19 crisis, suggests a report by McKinsey & Company.

One of the industry’s main issues is dealing with the sudden shift to remote working mainly because most carriers don’t have the kinds of tools and platforms to let employees work entirely from home, states the report.

As well, if interest rates stay low for a long time they could affect some lines of business that may then make those lines uneconomical to insure.

Some P&C lines may see more claims due to COVID-19

Several professional liability lines may see more claims activity:

• Cyber insurance will face increased losses given the heightened vulnerability introduced by an expanded remote workforce

• Directors and officers insurance often sees increased claims activity when the economy moves into a recession, and

• Healthcare professional liability and medical malpractice is another area of concern.

Business interruption insurance could be a potential exposure

Another potential exposure for insurance companies comes from business interruption coverage, which is typically included in property policies and indemnifies companies for loss of profits if the business is shut down for reasons specified in the contract. Generally, diseases such as COVID-19, are excluded as an insured peril (unless added by endorsement).

“COVID-19’s impact on business interruption coverage remains highly uncertain—but it clearly represents a reputational risk for P&C insurers, and finding the right balance and approach across all stakeholders will be challenging,” says the report. “After the 2020 policy year resolves, the industry will look to innovate and explore the potential for expanded pandemic-related coverage.”

New auto policy business will slow

With so many people working from home, new auto policies will slow down. In the United States, some carriers are starting to return premiums to customers, reflecting decreased usage. But with fewer miles driven and fewer cars on the road, frequency rates should decrease considerably, improving loss ratios in the near term.

McKinsey says companies need to set priorities to handle all these changes. These include: building remote-working models so people can continue to work from home; acting fast to communicate with stakeholders; stress-testing and developing strategies; making changes to products perhaps in pricing and coverage; considering government partnerships to help manage risk and gaining a deeper understanding of future risk.