In a letter to U.S. Reps. Gilbert Cisneros and Mike Thompson, both of California, representatives from insurance industry groups wrote that standard commercial insurance policies don’t provide coverage against a disease like COVID-19.
The letter was signed by representatives from the National Association of Mutual Insurance Companies, the Independent Insurance Agents & Brokers of America, the American Property Casualty Insurance Association, the Reinsurance Association of America and The Council of Insurance Agents & Brokers.
The organizations said in the letter, “Standard commercial insurance policies offer coverage and protection against a wide range of risks and threats and are vetted and approved by state regulators. Insurance coverage works by spreading risk, but that model simply cannot account for a situation in which losses are catastrophic and nearly universal. Standard business interruption policies do not, and were not designed to, provide coverage against communicable diseases such as COVID-19, and as such, were not actuarially priced to do so.”
The groups noted that the total surplus for all of U.S. auto, home and business insurers together to pay for all future losses is $800 billion, while recent forecasts for business continuity losses for small companies of 100 employees and under could range from $220 billion to $383 billion per month.
“The insurance industry must protect our solvency to pay on promises we have made to policyholders,” they said.
In addition, the organizations noted that the loan programs put into place by the CARES Act offer a “down payment” on financial support for Main Street, but more liquidity is required. They joined over 30 groups in a letter to congressional leaders and President Donald Trump seeking the creation of the COVID-19 Business and Employee Continuity and Recovery Fund.
In separate news, the $349 billion Paycheck Protection Program (PPP) launched for small businesses on April 3. The daily demand for loans was reportedly more than the Small Business Administration (SBA) processes in a year.