The Economics of Work Comp and the COVID Effect
Robert P. Hartwig, PhD, CPCU
Clinical Associate Professor of Finance, Darla Moore School of Business, University of South Carolina
Leading insurance industry economist Bob Hartwig said the COVID-19 pandemic has left lasting economic scars on the property/casualty (P/C) insurance industry and the US labor force. While early predictions indicated the pandemic could become the most costly insurance event ever, the financial impact for US insurers has been relatively modest.
Hartwig said the economic disruptions from COVID-19 will outlast the pandemic itself. Low interest rates and lower investment income for insurers will continue to be a challenge. Worker dislocations and changing hiring patterns will likely mean shifts in where people work, demand for workers, and participation in the workforce. All of these issues will have an impact on the workers compensation system.
His remarks also covered the insurability challenge for pandemics and how the market for pandemic risk may evolve in the future.
- COVID-19 insured losses in the P/C industry have been far lower than some early predictions. US insurers proved remarkably resilient during the pandemic. The challenges that remain appear manageable.
- COVID-19 has left many scars on workers and the US economy. As we saw a decade ago after the Great Recession, the P/C insurance industry, and the workers compensation line in particular, will face numerous obstacles to sustained growth in the years ahead.
- COVID-19 ignited a debate about the appropriate role of the P/C insurance industry in future pandemics and acknowledged the preeminent role of government. COVID-19 made clear the boundaries of insurability.
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