Aon Jumps Into the COVID-19 Fray with an Online Resource for Businesses

As the pandemic ramped up, Aon sprung into action, tapping into experience honed during the H1N1, Ebola and Zika outbreaks.

By: Jared Shelly | April 17, 2020

As the COVID-19 crisis swept through the world, companies began frantically looking for information.Naturally, they turned to their insurance brokers with questions.

Am I covered for income loss?
How is COVID-19 impacting my particular industry?
When will it be safe to open offices again?

Companies partnering with Aon were met with quick answers. Aon’s COVID-19 response is robust to say the least. The brokerage released an expansive resource website, an interactive web application that maps out the virus’ potential impact on specific employee populations and has models to help track the progression of the disease.

The COVID-19 response is led by a leadership task force at Aon that’s been working together for more than 10 years. It mobilized around pandemics four times during that span for H1N1, Ebola, Zika and now COVID-19.

“Business leaders are making decisions, and they don’t know the right answers. It’s a high-tempo, high-consequence situation where the wrong decision could mean the end of your firm,” said Nancy Green, executive vice president and one of the leaders of Aon’s COVID-19 response team.

Ample Resources

One of Aon’s first courses of action was to get information to companies through a response website, a series of detailed external resources that account executives could pass along to clients.

Topics include business continuity, supply chains, employee benefits, coverage and claims considerations, and industry-specific impacts.

“We knew from colleagues in Asia in January that they were getting tons of questions. We said let’s take documents we knew were important in past events and update them with our knowledge of COVID-19,” said Green.

Interactive Web Application

By April 3, Aon released an interactive web application that maps out the potential COVID-19 impact on specific employee populations throughout the U.S.

It uses advanced epidemiologic models and geographic-specific infection rates to help employers anticipate their medical costs, absenteeism and potential need to shift work operations as the virus spreads or fades.

The web app presents the data in a handy dashboard format, and it’s updated daily.

The model culls data from a variety of sources, like the CDC, the Kaiser Family Foundation, Harvard University and others. It allows employers to forecast the virus’ impact on their businesses into the summer and fall.

Income Loss and a Black Swan Mindset

One of the most common questions from Aon clients is around business interruption and income loss.

Typically, business interruption is tied to property insurance claims, meaning many companies won’t be covered for these devastating losses. Still, Aon’s response team is helping clients understand the steps they can take to mitigate losses.

“We want to make sure they’re taking action on business continuity. Have they adjusted their plans to meet COVID-19’s unique characteristics? How is their employee communications?” said Green.

“Insurance is a tool, but there are other things employers can do to mitigate the impact.”

The team is helping businesses understand just how different COVID-19 is from other catastrophes.

For example, there’s no exact end-date for the pandemic. The COVID-19 event arc will instead come in waves as governments implement interventions, mitigation and suppression strategies, said Green. She expects that pattern to continue until there is a vaccine or effective treatment protocol.

Nancy Green, EVP, Aon; and a leader of Aon’s COVID-19 response team

“A pandemic crisis management model for COVID-19 is built around a circular approach that goes ‘react,’ ‘respond,’ ‘recover’ and ‘reshape,’ ” she said.

“For a while during these waves, you’re going to be moving back and forth from ‘react’ to ‘respond.’ Understand these next several months will be fluid.

“It can enable a client to tackle the question of when to bring employees back. The model is predictive and has nuance down to the zip code,” said Green.

“We’re providing information that helps them make decisions. There is medical cost information, information on what the curve might look like for their geography. Then it’s up to them on how they want to implement.” &

Jared Shelly is a journalist based in Philadelphia. He can be reached at [email protected].

How a Carrier Partner Can Help Navigate a Challenging Management and Professional Liability Market

A combination of a choppy economy with increased claims frequency and severity could lead to rate increases in the Management & Professional Liability market.

By: Risk & Insurance | April 3, 2024

Rates in the management & professional liability (M&PL) markets were on the rise from 2020 to early 2023 and are now falling rapidly.

M&PL divisions manage a number of different insurance products including management liability (D&O), professional liability (E&O), employment practices liability (EPL), fiduciary liability policies, cyber, etc. In 2023 and into 2024, a big influence on the marketplace has been the extremely aggressive and softening public company D&O market.

Though these rates have been softening for management liability, that may change over the next few years as companies continue to adjust their business models motivated by economic uncertainty. Layoffs were up nearly 200% last year, Forbes reported, even as other recession indicators, like the inflation rate, improved. A recession could lead to an increased claim activity and force carriers to raise rates.

“Whenever there is a meaningful downturn in the economy, we tend to see claim frequency pop up,” said George Schalick, Jr., senior vice president of the Management and Professional Liability Division at Philadelphia Insurance Companies (PHLY).

With continued fiscal uncertainty, businesses potentially already burdened with pandemic-related claims should seek a carrier with a long history in M&PL products. They will provide much-needed risk management guidance and be better positioned to support their insureds during market fluctuations.

Why Insureds Might See an Uptick in M&PL Claims

George Schalick, Jr., Senior Vice President of the Management and Professional Liability Division, Philadelphia Insurance Companies

The current soft market might come as a bit of a surprise as it does not track with previous underwriting cycles and economic conditions. Afterall, many privately held and non-profit organizations struggled during the early days of the pandemic with shutdowns and rapidly declining revenues. But the Government assistance programs, like the Paycheck Protection Program loans, helped keep many afloat during the tough times.

“During COVID many organizations stopped doing business until they were able to sort out all of the health and safety challenges,” Schalick said. “They were forced to lock down, but then all the government assistance programs allowed them to keep people employed. The increased volume of claims we anticipated we would see coming from the lockdowns and restrictions that were imposed upon businesses in the U.S. didn’t manifest at first.”

“Just because there wasn’t an onslaught of reported claims at the beginning of the pandemic, doesn’t mean the circumstances that would give rise to a claim being reported didn’t occur. Courts and the judicial system were closed or slowed and now that they are back open, we’re starting to see the circumstances that occurred during the COVID lockdowns becoming claims today,” Schalick said. “Litigation is progressing.”

Added to the delayed pandemic litigation is a concern over newer claims that might be filed as the country inches toward an economic downturn. Though a recession was avoided in 2023, experts think a soft dip could occur in 2024, with 76% of economists saying there’s a 50% or less chance of an economic downturn this year — that almost always results in more management liability claims.

“During the Great Recession in 2008, we saw an almost immediate spike in claims because of the economic conditions and the pressure it placed on organizations. They were making personnel changes with significant belt tightening almost immediately.” Schalick said.

What’s in Store for M&PL Policy Rates in 2024?

Despite an uptick in claims and increased economic uncertainty, management liability rates haven’t increased, resulting in market-wide pricing levels that may not meet the increased pressure of rising settlements and jury verdicts.

“Rates are going the other direction and settlement values are not falling,” Schalick said.

The mismatch between rates, claim frequency and severity is, in part, because carriers experiencing the dramatic soft market in the public D&O market are seeking premium gain in the private and non-profit market.

“In the public company market, the rates have been decreasing significantly. The rates were increasing in the private, not-for-profit market, and rightfully so, but there’s a desire to supplement overall mid-size D&O for carriers who also write private not-for-profit, and they see that as an opportunity to aggregate premium,” Schalick said. “So the always competitive landscape in the private, not-for-profit market has dramatically increased in the last 18 to 24 months.”

Still, companies of all sizes and types should be concerned about management liability rates in the future. Legal system abuse is resulting in increases in both the amount of litigation and the size of verdicts plaintiffs are receiving.

Certain areas of the country are particularly vulnerable to this type of legal system abuse. As a result, insureds in these localities are likely to be vulnerable to rate increases.

“The environment is so positive for the plaintiff that forces premium increases so carriers are able to stay in that market long term,” Schalick said.

Why a Tenured Carrier Partner Can Help Insureds Navigate An Uncertain Market

It’s clear that insureds are facing an uncertain M&PL market over the next few years. Fortunately, carriers with a long history in the M&PL space will be there to offer stability.

Philadelphia Insurance Companies has been supporting this market for 35 years. PHLY is committed to offering long-term rate stability, even as economic and claims trends start to push premiums upwards. They have an appetite for all sorts of companies, large and small, for-profit and nonprofit alike.

“We’ve been at this game for a long time and are one of the most tenured underwriters in this space,” Schalick said. “We like to stay very consistent.”

PHLY has worked with both for-profit and non-profit on management liability policies. With dedicated M&PL teams throughout the company’s 13 regions, PHLY provides the support agents and brokers are looking for on behalf of their clients. The teams know their regions well and can respond to local trends. They’re also dedicated to making the renewal process as easy as possible for their partners and policyholders.

“We have real confidence in our results, so we focus a lot on making the renewal experience as painless as possible for all agents and insureds,” Schalick said.

The company is also investing in tools to help insureds avoid losses. Earlier this year, they launched a new online risk management platform, PHLYGateway, which offers resources for insureds on how to create an employee handbook and trainings on issues such as recognizing workplace sexual harassment and discrimination.

If insureds have questions, they can consult a Best Practices Help Line, provided via the platform. That way, they can get on the spot risk management guidance to help them prevent claims.

To learn more, visit: https://www.phly.com/mplDivision/managementLiability/default.aspx.

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Philadelphia Insurance Companies. The editorial staff of Risk & Insurance had no role in its preparation.