Businesses across the country have suffered a devastating blow since the beginning of the COVID-19 pandemic. While Congress-enacted measures brought some relief, they have not done enough to support impacted American businesses.
Today’s Omaha World-Herald opinion piece by former U.S. Senator Ben Nelson (D-NE) highlights that blaming insurance companies is distracting people from rallying around the one solution we need: government-backed relief for struggling businesses.
As federal policymakers debate the next round of COVID-19 aid, Sen. Nelson stresses three fundamental principles that must be included in any proposal designed to address the real issue that is pandemic risk:
- Only the federal government has the financial means to provide relief. Since pandemics have the potential for unlimited impact, they are fundamentally different from insurable events, which are limited in terms of time and geography. “But if pandemics were to be included in insurance coverage, a market-based premium for a risk of this nature would be very expensive, and likely cost-prohibitive, for many small businesses.”
- Support for businesses must be provided in a fast and efficient manner. “Prioritizing transparency and accountability is key to ensuring all businesses that need immediate payments get them and are able to stay operational in case of a prolonged disruption period.”
- Businesses must be protected from losses and incentivized to retain employees. Policyholders must be shielded from financial harm without needing to turn to litigation for coverage or jeopardizing existing insurer commitments. “If insurers were forced to include pandemic coverage without having collected its costly risk-adjusted premiums, the industry — an important engine of our economy in Nebraska and across the country — could collapse.”
The full piece is pasted below. For more information, please visit fairinsure.org.
OMAHA WORLD-HERALD: Midlands Voices: Be Wary Of Placing Undue Burdens On Insurance Sector In Virus Era
COVID-19 has upended the lives of millions of Americans over the past few months in ways no one could have predicted. Small businesses, in particular, have borne the brunt of the nationwide economic devastation.
For thousands of Nebraskans, this experience is deeply personal. During the April pandemic peak, unemployment claims in the state skyrocketed to more than 10 times pre-pandemic levels. And though Nebraska claimed the lowest unemployment rate in the U.S. amid the COVID-19 crisis in May, it saw its unemployment rate rise again in June, up 3.6% from the same month in 2019.
While Congress-enacted measures brought some initial relief, they simply have not done enough. Amid the blame game and finger pointing that have followed, insurance companies have been caught in a political crossfire that is distracting people from rallying around the one solution we need: government-backed relief for struggling businesses.
During my 12 years in Congress, my colleagues and I also dealt with our fair share of unforeseen crises. From the terror attacks of 9/11 to the 2008 financial crisis and other large-scale stimulus bills, I learned firsthand the kinds of policies that best support both consumers and businesses during economic downturns. That’s why I can say with confidence: forcing insurers to cover uninsured business interruption (BI) claims is not the answer.
Members of Congress and various industry groups have helped to move the needle by presenting several thoughtful proposals to address the real issue that is pandemic risk. And while they all differ, they all get at the same three fundamental principles: Only the federal government has the financial means to provide relief; support for businesses must be provided in a fast and efficient manner; and businesses must be protected from losses and incentivized to retain employees.
First, an event of this magnitude is impossible for the private sector to underwrite. The National Association of Insurance Commissioners (NAIC), where I served as chief executive until as recently as 2015, has made clear that BI policies were generally not designed or priced to provide coverage against communicable diseases, such as COVID-19. In fact, the NAIC has labeled swift action by Congress to directly address the needs of citizens and our economy as the “most effective and expedient means” to combat the devastating impact of the virus.
Pandemics are excluded from standard BI policies for good reason. Insurance works by pooling risk. Since pandemics have the potential for unlimited impact, they are fundamentally different from insurable events. When limited in terms of time and geography, costly events — such as hurricanes or wildfires — can be covered by BI insurance. But if pandemics were to be included in coverage, a market-based premium for a risk of this nature would be very expensive, and likely cost-prohibitive, for many small businesses. Therefore, only the federal government has the financial ability to provide relief needed during such unpredictable crises.
Additionally, when a pandemic hits, we must have a government program already in place to provide widely accessible relief payments to businesses in a quick and efficient manner and with minimal possibility of abuse. Prioritizing transparency and accountability is key to ensuring all businesses that need immediate payments get them and are able to stay operational in case of a prolonged disruption period. To this end, instead of an indemnity-based process, pandemic recovery payouts can be tied to business operating expenses.
Finally, proposed government policies must not only protect businesses from losses, but also incentivize them to keep their employees, without turning to litigation for coverage or jeopardizing existing insurer commitments, such as to auto and homeowners payouts. This is vital to economic stability. If insurers were forced to include pandemic coverage without having collected its costly risk-adjusted premiums, the industry — an important engine of our economy in Nebraska and across the country — could collapse.
With uncertainty growing by the day, and the increasing possibility of a virus resurgence in the fall that could once again force thousands of commercial establishments to close, we simply cannot afford to continue to allow our businesses — and our crucial American workforce — to suffer. Congress must recognize, and act on the fact that a government-backed solution is the only fix that can provide reliable relief to business owners today and help to protect them from similar situations in the future without risking insurers’ existing commitments to policyholders. Nebraskans, and Americans everywhere, need their government to do more.
Ben Nelson is a former U.S. senator and governor for Nebraska and the former director of the Nebraska Department of Insurance. He also served as the chief executive officer of the National Association of Insurance Commissioners from 2013 through 2015. He is currently the CEO of Insurance Care Direct, a health insurance agency in Florida.