BULLETIN

April 1, 2020

Our Commitment to Western National’s Customers, Partners, and Employees During COVID-19

At Western National Insurance, we sincerely appreciate the trust our customers have placed in us to always deliver on our policy promise. The single most important commitment we must fulfill is to pay covered claims, no matter the number of those that may pop up from a single catastrophic event. That said, it is equally important to not pay claims that are not covered, preserving our capital for the fulfilment of the promises we did make.

You may have heard about some state and federal legislative attempts to force insurance companies to pay non-covered claims. As an insurance professional and agency partner of Western National, we think that it is important for you to understand this issue as you may well be questioned yourself about our industry’s response to this COVID-19 emergency situation.

The loudest legislative push has been to compel commercial insurance companies to pay Business Income losses to our insureds, whether that coverage exists or not. In fact, Business Income is covered for many reasons (usually related to a fire or windstorm causing a business to close for a short time). However, not only is this coverage not available if there is no actual physical loss to a commercial building, but loss due to virus or bacteria is usually specifically excluded from our policies. This has been the case for many years because the scope of a viral pandemic is potentially so large that our industry does not have the money to pay all the losses. In the case of this coronavirus, for example, one industry economist estimates such losses for small businesses alone (those with 100 or fewer employees) will be between $220 billion and $383 billion per month – and note that since it is not covered, insurance companies have not been collecting additional premium that would’ve been necessary to pay for viruscaused losses. To put the pandemic in perspective, that same economist estimates the total surplus for all U.S. home, auto, and business insurers to pay future losses is roughly $800 billion.

Another example of legislative direction to pay losses is the order in several states to pay under a personal auto policy for any liability created when an insured uses their personal vehicle to deliver food, etc. Insurers writing personal auto coverage typically consider food delivery a business activity that is better suited for commercial auto coverage. In this case, however, and since we believe that as an insurer we have the capital to pay such losses temporarily without endangering the ability to pay other claims, we will cover the exposure of vehicles used to deliver food on our personal auto policy.

We want you as our agency partners to be proud of what we do at Western National in response to an emergency situation such as this. Despite what may be reported about the industry’s response, we believe you should know the good that we (collectively, through the efforts of our employees and partners like you) are doing in this situation, such as:

Remaining open – which may not sound like much on its surface, but we have done what is needed (including spending money on extra equipment to support work from home) to stay open – and by doing so, continuing to pay all employees – so we can continue to serve our customers. After all, fires, auto accidents, and other losses do not take a day off, and we are still in business paying millions of dollars in claims.
We are working with policyholders who may be experiencing financial difficulties to make new arrangements (e.g., postponing due dates and adjusting payment plans).
In most cases, when we are made aware that COVID-19 has created an economic hardship for a policyholder, we are not cancelling policies due to the policyholder being unable to pay or if the policyholder has an expired driver’s license that cannot currently be renewed.
When requested, we are lowering premiums now rather than waiting to post-term audit, through adjusting payrolls and receipts on Worker’s Compensation and General Liability policies to recognize the revenue decreases some of our policyholders are experiencing.
In personal lines, rate review and implementation of product pricing revisions occur throughout the year. Revisions that were previously filed, approved, and programmed in our system will continue, but we have suspended new rate implementations for standard personal lines to mitigate premium increases for policyholders during this time.

We should also note that, unlike some businesses who may be weaker financially, we are paying all of our bills, keeping our commitments and business dollars going to our vendors and partners. This includes state and federal taxes that support the monies that will soon be handed out by the government. We are continuing to invest in our country, buying municipal bonds and making other investments that keep construction going (and keep people employed). We have accelerated the distribution of our annual charitable dollars, which are being put to good use now through the rest of this year as well.

All the good and financially sound practices we have created and engaged in have resulted in Western National being strong enough to do all these things and to survive quite well. Hopefully this ability to be a strong societal and community contributor will not be negated by short-sighted legislative knee-jerk reactions to redistribute capital at the expense of our policyholders and industry.

Thank you for your continued trust in Western National Insurance. We remain committed to supporting our policyholders, employees, and agency partners during this challenging and uncertain time in history.

Stu Henderson
Chief Executive Officer
Western National Insurance Group