As another year comes to a close, we recommend finding time to reflect on 2021…
COVID-19 Update April 21, 2020
Big News! The bill increasing the amount of money available for the SBA PPP loans just passed in the Senate (download below). Now it must go to the House, then to the White House for the President’s signature. We suggest you get with your banker, if you did not get approved the first round, and get all your documentation ready for the second mad rush to get approved.
Today was Part 2 of the Insurance webinar (slides attached) that NAPEO broadcast. Today they completed the FAQs from the first webinar and discussed Business Interruption Insurance. The presentation slide-deck can be downloaded below. It contains some state-specific information about pending bills or executive orders that are either in place or coming soon.
If you are unaware, many states have either started the process or have put in place rules for the Presumptive Claims. This was started in Illinois a couple of weeks ago. Basically, they have put rules in place that if a first responder gets infected with COVID-19, it’s automatically assumed that they were infected at work, so it then becomes a workers compensation claim.
California has taken this law and extended it to also include “All Essential Workers.” Many states have either passed a similar law, they have one pending in a bill, or the governor of that state is about to issue an executive order proclaiming the same. Louisiana is a state that has a few bills pending to put this in place.
To put this in perspective, let’s look at the California law and the potential cost in California alone. Keep in mind the insurance market in California makes up 20% of all the US premiums for workers compensation.
The cost estimate to cover first responders only for Coronavirus through this legislation is somewhere around $6 billion. If they increase it to all Essential workers, that would be an estimated $5.2 Billion in claims in addition to the first responders claims.
So, the combined cost of covering both the first responders and the essential workers would be an estimated cost of $11.2 billion in new workers compensation claims for California alone. Last year the total premium for all workers comp policies in California was $18 billion. So, if you do the math, all premiums will go up next year by at least 60 percent.
This takes us to the future of workers comp carriers.
The bottom line is there are several carriers that are not going to have the ability to absorb these claims without some sort of federal help, similar to the AIG bailout years ago. Now is the time to get to know your carrier and make sure you have a solid relationship. In addition, you need to prepare for rates to go up substantially next year.
Our industry believes if you are with a PEO, that is going to bode well for the future.
The rates have been soft for many years and even though the rates are low, your rates are still discounted by getting comp through your PEO. When the market gets harder, your rates will go up and access to carriers will dry up.
The PEO industry has gone through the changes in the market and the insurance carriers like dealing with PEOs, because we can help manage the policies, costs, and claims for hundreds of clients, making administration much easier for the carriers.
In addition, we help put in safety compliance for our clients along with claims management. Once your premium goes up, the discounts that were small during the soft market may be substantially more when the market turns harder.
Business Interruption Insurance is another type of insurance that is going to be greatly affected by this pandemic.
Several states are trying to make these policies retroactively pay the business interruption due to the shutdowns, starting with the date the Government shutdowns started enforcing them several weeks ago. Most policies have an exclusion for any virus or pandemic; however, the loophole is that this is a government-mandated shutdown. Many businesses were forced to close their doors due to a mandated shut down, not the Coronavirus.
The speakers in the webinar I attended today seemed to think if anything comes out of this it will be similar to what happened after 911, where they added coverage that you have to sign up for automatically on your policy for terrorism or deny the coverage.
Nothing is in the works; however, if states pass a law that the Business Interruption Policy must pay even though there is an exclusion, then there will be trouble with carriers going bankrupt.
- Alert 4 Step Plan – great advice on what to do if you have an employee that contracts Coronavirus.
- Alert: Texas Begins Reopening – this details what the governor of Texas is doing to get businesses open again.
- COVID-19 Blueprint for Recovery – this is from the National Restaurant Association, and it’s great info about reopening guidelines for our Hospitality clients.
- Coronavirus and Workers’ Compensation Part 2 – this has some great details about which states are implementing the changes for both work comp and business interruption.
- Senate Coronavirus Relief Bill – this is the actual bill that has passed the Senate this afternoon
Sorry for the length of this update, but we have lots of good info to share!
I don’t want to get political, but there must be a balance between staying healthy as a society and getting the economy working again. There are businesses that could reopen if certain training and safety procedures are followed, especially in an office environment. These could be brought back slowly with rotating schedules between office and work from home, keeping social distancing in place.
This will be tough for certain industries more than others, namely the hospitality industry. We hope and pray to get as many people back to work safely as quickly as possible.
Lastly, I tend to share a lot of information using acronyms like PPP, and assume most people understand these things. This along with all the HR terminology. If you don’t understand something we have shared, please reach out. We are here to help!