Coronavirus crept through the world methodically. First came warnings of international cases. Soon social media feeds were filled with images of desolate Chinese cities and videos of Italians singing in unison from their balconies.

In what seemed like a sudden flash, the virus was on American shores — closing down schools, shuttering restaurants and leaving far too many casualties.

The economic damage was swift and heavy. The stock market crashed, unemployment claims skyrocketed, and industries like construction, retail and hospitality were decimated.

Everyone seemed to have the same question: Would insurance companies cover business interruption resulting from the pandemic?

The short answer: no. Business interruption is typically part of property insurance and doesn’t kick in unless there’s actual damage to property.

Attorneys will undoubtedly get creative as they fight for coverage. One recently claimed that contaminated surfaces inside a New Orleans restaurant counted as property damage. Perhaps courts will agree. Perhaps business interruption becomes part of a government stimulus package. The answers remain to be seen.

What is immediately clear? Business interruption (BI) coverage has quickly become top-of-mind for companies of all types.

“BI has always been the red-headed stepchild of insuring your business,” said Matthew Struck, partner and co-founder of Treadstone Risk Management.

“Everyone is always concerned about traditional risks. What happens if my building burns down? What happens if someone sues me? Only if you were a risk management purist were you thinking of Black Swan events” like coronavirus.

Insurtech Has Prepped for This Very Moment

Traditionally, business interruption hasn’t been tough to underwrite or assess. If a business were shut down for the entire month of August due to a natural catastrophe, a simple analysis of financials could determine probable revenue loss during that time.

But business isn’t that simple anymore. Supply chains have gotten complicated. Technology is quickly evolving. Industries are changing. It’s made business interruption underwriting and claims adjusting much more difficult.

Matthew Struck, partner and co-founder, Treadstone Risk Management

Even before the coronavirus crisis took hold, companies specializing in Insurtech — technological innovation meant to create savings and efficiencies in the insurance industry — have been making business interruption underwriting and claims adjusting easier and more accurate.

That’s due to the rise of Big Data and technology like artificial intelligence, machine learning, and natural language processing. Insurtech companies have created models to predict business interruption losses; analyze mountains of data; and output metrics in easy-to-understand charts and digital dashboards.

“Companies are creating more sophisticated modeling techniques for specific losses in order to understand what a business interruption event might look like from a financial standpoint,” said Chris Cheatham, CEO of RiskGenius.

“Typically, actuaries, underwriters and brokers are not necessarily technology wizards. And when you don’t fundamentally understand technology, it’s hard to understand what constitutes business interruption in the technology space.”

Cheatham’s company has raised more than $60 million in venture capital funding, according to Crunchbase, and he’s a frequent commentator on the subject to his 150,000 LinkedIn followers.

RiskGenuis uses artificial intelligence to quickly and accurately review insurance policies to streamline work for brokers and underwriters. In the business interruption space, RiskGenius can analyze which policies will cover it and what that coverage may look like. It counts FM Global, Liberty Mutual and Everest Insurance as partners.

“It’s surprising, but a lot of carriers don’t have that kind of analysis done on their portfolios,” said Cheatham.

“We call it emerging risk analysis, where you can look at all the insurance policies in a portfolio, find out which ones fall into which buckets and then triage around those.”

Another company born out of Insurtech is Bold Penguin, a commercial insurance exchange that uses artificial intelligence and natural language processing to match small businesses with insurance companies.

“Our process makes it 300% faster. It gets done without calling around and guesswork,” said Amber Wuollet, director of marketing at Bold Penguin. “We don’t pass along any risk that doesn’t meet an insurance company’s underwriting criteria.”

Wuollet said coronavirus fears “quadrupled” inquiries for business interruption coverage on Bold Penguin since February 9.

“We have had many owners and risk managers calling in specifically mentioning business interruption coverage,” said Wuollet.

With so many slight differences in language from policy to policy, Bold Penguin helps small businesses easily find the coverages or bundles of coverage that fit their businesses and unique needs.

Data-Driven Underwriting

 Corvus Insurance uses machine learning and AI to make cyber coverage around business interruption more accurate. Corvus analyzes a company’s web hosting, ISP providers, email providers and software to learn about its cyber security posture.

“There is tons of information about individuals online. That same idea applies to companies,” said Brian Alva, vice president of cyber underwriting at Corvus.

“We’re able to look at all their public-facing infrastructure to see what security they have — then we map that to see which providers have above average or below average histories of client breaches. We can scan the dark web to see if employee credentials are for sale. These things can show evidence of a past breach or prevent a future breach.”

An advantage of using tech like Corvus is not having to rely on error-prone questionnaires filled out by clients who unknowingly submit incorrect or out-of-date information.

Chris Cheatham, CEO, RiskGenius

“We can get more up-to-date information automatically without relying on clients to answer applications. That gives us a lot more insight into what we’re doing on the underwriting side,” Alva said.

The cyber risks that Corvus and others are working to stop have broadened in recent years.

Historically, cyber issues meant a health care organization losing records or retail companies suffering a breach of credit card information. But cyber is now a major business interruption risk due to dangerous ransomware and malware attacks.

Ransomware attacks have extracted an average of $2,300 per victim in 2019, up from $210 four years prior. One called Samsam infected more than 200 U.S.-based victims and collected $6 million — and counted local governments as victims.

Before any attack occurs and stops business in its tracks, Corvus analyzes a company’s email security protocols to recommend things like email filters and other security measures.

“From an underwriting standpoint, calculating a business interruption claim from the actual costs incurred is still difficult but we can look at things that make someone more or less likely to suffer a claim and tailor underwriting that way,” said Alva.

Future of BI and Insurtech

With the economy suffering in the wake of the coronavirus, expect Insurtech innovation to suffer in the short-term.

Startup funding is expected to dry up and companies could struggle to keep internal innovation teams afloat. Still, business interruption is so top-of-mind that innovation from Insurtech is all but inevitable.

“Another wave is coming. Call it wave two of Insurtech,” said Cheatham. “That’s going to be great, because you’re going to see a lot of ideas that are more tangible and salient start to take hold.”

What will “wave two” look like? Expect more specialization and modeling for specific business interruption events. Data will continue to be accessible and abundant helping to further refine what constitutes business interruption and the damages associated with it.

And expect the data to be disseminated in ways that are easy to understand, like cellphone apps or interactive dashboards.

“All these new data points available to people will be extremely helpful in modeling out scenarios for business interruption that we just never thought of before,” said Cheatham.

“I think you’re going to see a lot of specialization around that.”

With the coronavirus proving that business interruption coverage is hardly a given, many could look to insurtech to make sure the data and risks are disseminated accurately, so businesses are better prepared next time around.

“As that demand grows, you’ll see new forms of companies — particularly Insurtech companies — coming to market to help meet those needs,” said Alva.

“This pandemic has brought business interruption to the forefront. As an industry we’re going to view the demand there to see what solutions we can come up with.” &