The Insurance Industry in 2022: What to Expect
By Michael Giusti
With the holiday season in full swing, 2022 is nearly upon us. And with the new year comes a new round of insurance concerns, changes, and updates. From rate changes to further COVID complications and even to shifting rules regarding film and production insurance, the new year will likely bring more than a few things to watch in the insurance industry and coverage types.
Inflation and Health Insurance
Supply chain backlogs and supplier issues have sent inflation shockwaves through many corners of the economy. And while an insurance policy can’t get stuck on a dock, some other factors may be coming into focus that could influence policy pricing in 2022.
For employer-provided health care, a Society of Human Resources Managers’ survey showed that many employers are expecting to see a bump in premiums for their employees’ plans. Employers told the society they are expecting costs to rise a little more than 5%. That is more than the 2.1% increase they felt in 2020 and the 4% increase in 2019.
The past couple of years have been anomalous when it comes to health insurance pricing, due almost exclusively to COVID-19. On the one hand, costs to contain the pandemic, from increased staffing to astronomical ICU treatment ran up some of the tab. But on the other end of the ledger, patients deferred routine care and voluntary surgeries due to either staffing shortages or a fear of going in to a health care facility, not to mention the effects of the lock downs.
Now that things are returning to more of a normal, those past years aren’t serving well as a basis for future costs, and many insurers are bracing for what all that deferred care might mean for future costs.
When it comes to Affordable Care Act policies, the Keiser Family Foundation did an analysis that said the news may not be bad. Their analysis showed that the average plan may see a 3% premium decrease as compared with 2021 rates for plans in states that use the HealthCare.gov system, and only see modest increases in states that operate their own marketplaces.
KFF also found that more insurers are opting in to many of these plans, with 32 more insurers participating this year, which they say may act to bring down premiums through competition.
Also, the American Rescue Plan Act, passed by Congress in 2021, will continue to offer enhanced premium tax credits, bringing the cost down for more families than in years past.
Auto Insurance in 2022
When the pandemic swept the country and subsequently forced drivers to stay home, insurers responded in many cases by issuing rebates and premium breaks to many of their customers.
But, with driving back to normal, or at least close to it, those reduced miles – and the reduced risk – is also back close to normal, and premiums are back on a normal trajectory.
Some analysis is projecting an increase in premiums for 2022, with many insurers already filing or planning to file for rate increases.
Rate increases appear to be largely confined to the single digits, although some companies are indicating they could be higher to reflect losses.
Those losses have come from increased driving risk, but also from the environment.
For example, Hurricane Ida flooded hundreds of thousands of vehicles that were covered by comprehensive insurance policies, meaning each of those represent a loss for the insurer. And with climate-change-driven forecasts for more natural disasters in the near future, insurers have their eyes on the potential for future losses as well.
Supply chain shortages, specifically in aftermarket parts and in chips for vehicles, also could drive up repair costs, and in turn result in more costs for an insurer after an accident. More costs mean higher premiums.
Travel Insurance Updates
One of the industries most affected by the pandemic is travel. Whether it is tourism, airlines, cruises, or really any destination away from home, COVID-19 has dealt a withering blow.
Because of the pandemic-related uncertainty, travel insurers are now saying demand is higher than at nearly any other point.
Travel insurance protects consumers from many of the risks involved in the pandemic, but not all of them.
The most obvious place travel insurance shines is if a traveler catches COVID before or during the trip. While before the pandemic, most policies had specific exclusions for pandemics, most have now instead pivoted toward the consumer and are now treating COVID like any other infectious disease. That means if someone catches the virus and has to cancel a trip, the insurer will pay out. Likewise, if someone falls ill mid trip.
Where it becomes less clear is what happens if a travel restriction is imposed mid trip that interrupts travel. Say someone was in South Africa mid vacation when the new variant emerged, and now cannot travel home without a PCR test within 24 hours of flying. It is unclear which policies would pay for those tests, or for hotels in case the timing of the tests prohibited the traveler from getting on the flight in time.
The medical aspect of travel insurance is especially important if someone is traveling overseas, or even within the country but out of network of their insurance plan. That is because travel insurance can defray otherwise crippling costs to cover health incidents, and can even step in to evacuate travelers to destinations better equipped to treat them.
If a flight is canceled, most policies will step in to cover them, but if the interruption is caused by a civil authority, again, it is not clear, and each policy language would come into play.
One aspect of travel insurance that has become more common is that many destinations are now requiring travel insurance as a condition of making the trip. Many Asian and Caribbean nations won’t even grant a visa unless you show proof of vaccination and a sufficient travel policy.
One truism of travel insurance continues to apply, and that is that fear of travel is never covered under a standard policy. So, just because a location looks dangerous doesn’t mean you will get reimbursed if you back out of your trip.
For that, you need what is called Cancel For Any Reason travel insurance. These policies are more expensive, have to be purchased nearly the same time as the trip, and only refund a portion of the un-refundable portion of the trip, but they are the only way travelers can be reimbursed if they back out of the trip on their own.
One thing to keep in mind is if a trip has flexible cancelation policies and is within the coverage area of someone’s health insurance, travel insurance may not make as much sense. But if any of those aspects leaves the traveler feeling exposed, travel insurance continues to be a good option during the pandemic.
Insurance Innovations
Many areas of coverage fall a little out of the mainstream. For example, NFTs – nonfungible transfers – are a growing area for collectors. One way to think of an NFT is as a digital collectable whose ownership is recorded on a blockchain ledger. And where a physical collectable, like a painting, baseball card, or bottle of wine could be insured, their digital counterparts can’t generally be insured by mainstream policies.
Some insurers are exploring the option, especially because NFTs do represent some specific risks that would be handy to insure. For example, a hacker could steal the NFT from a digital wallet, or the server where the underlying digital asset resides could go out of business. Insurance policies would be a handy way to defer those risks.
Another blockchain-based asset that does have access to some insurance is cryptocurrency.
Cryptocurrency comes with a few basic types of risk: crime, custody, business, and decentralized finance risk.
Crypto crime insurance policies are there in case someone steals an actual crypto coin, either by somehow acquiring the digital key, or by embezzlement.
Custody insurance is there in case someone simply loses their key or otherwise no longer has access to their wallet.
Crypto business policies come in the form of professional indemnity and directors’ and officers’ coverage.
And the decentralized finance policies, known as DeFi, are there to ensure the cryptocurrency technology and software itself delivers what is promised.
Some specialized companies are offering crypto insurance right now, and others are taking a close look at it.
Decarbonized Insurance
With many areas of the economy taking climate change seriously, some of the products consumers are using to make a difference also need insurance. Electric vehicles, for example, are a terrific way to get around town emissions free, but for now, insuring them costs a bit more than their internal combustion brethren.
The higher costs don’t necessarily come because of the different drive train, but instead are a result of EVs tending to cost more, meaning that replacing them in a total-loss accident would cost more.
Also, repairing them becomes more expensive because there aren’t as many mechanics certified to work on EVs as are traditional gas engines, and the parts for EVs are a bit scarcer because there just aren’t as many of them on the road to justify aftermarket investment.
As EVs become more ubiquitous, market forces will likely bring many of those costs down.
And for its part, Tesla is pioneering Tesla-only insurance. For that, Tesla is using its onboard diagnostic equipment to give Tesla Insurance customers a driving score, which will be used to give a customized rate. The idea is that with Tesla’s standard suite of safety equipment, accidents will be less likely, and so insurance premiums can be less expensive.
Another area environmentally conscious consumers need to be aware is if they install home rooftop photovoltaic solar.
As a rule, if something is a permanent addition to the home, homeowners’ insurance will cover it. That is true of solar panels as well — unless they are specifically excluded.
Some policies do specifically exclude solar panels, because they are seen as a risk to blow off in a wind storm, or to be battered in a hail storm. Also, if the panels are installed as freestanding modules on the ground, they won’t be considered a piece of the home. And if they are installed on another structure, such as a shed or detached garage, policy limits may be different than if they were on the primary residence.
One way consumers are getting around these exclusion is by leasing the panels instead of buying them. When the panels are leased, the homeowner isn’t responsible if they are damaged – the business that leased them is. So, if they are damaged, the business needs to repair or replace them, depending on the terms of the lease.
Health Insurance Outlook
For employer-based health plans, open enrollment differs by plan, but tends to be over by fall. So, for the most part, by this time in the year, policies are all set in stone for 2022. The same is true for Medicare, which closed open enrollment Dec. 7. If someone missed these deadlines, they either need to wait until next calendar year, or can sign up if they have one of the specific change-in-life events, such as the addition of a child, marriage, move, or job change.
For the Affordable Care Act policies, open enrollment ends Jan. 15, so there is still time to sign up for a policy if an employer plan is not available.
For low-income people, Medicaid and the Children’s Health Insurance Program does not have a specific enrollment period, and people can sign up at any time.
For 2022, COVID vaccines will continue to be free to the customer, because the government pre-paid for the doses. The same is true of COVID boosters. Private insurance and Affordable Care Act plans, as well as Medicare and Medicaid, will also pay for the delivery of the shots at no cost to the patient. And uninsured people can also get the shots at no cost through a special program laid out by Congress.
COVID testing at health care providers is also available at no cost to the consumer — including uninsured patients who can get no-cost tests at community-based testing sites.
New in 2022 is a policy President Joe Biden just signed mandating that at-home tests be reimbursed by private insurance. So far it appears that does not apply to uninsured patients or patients with Medicare, though.
As for the new Omicron variant, drug makers, specifically the ones who developed the mRNA variety, are exploring if the new variant will require a specific booster. They say it will likely be several weeks before there is clarity on that issue. It is also unclear whether newly developed boosters would be covered at no cost to the consumer in the same ways the existing boosters are.
Biden announced sweeping vaccine mandates through the Occupational Safety Health Administration, as well as mandates that federal employees, health workers, and military employees all must be vaccinated. But each of those mandates is being challenged in court, and it is unclear which, if any of them will survive those challenges.
One area of medicine that thrived during the pandemic was telemedicine. That was driven by federal and private insurance rule waivers that reimbursed remote visits the same way that in-person visits are reimbursed.
Many of those waivers are expiring now, though, and it is unclear what the future of telemedicine will look like absent those waivers, should they not be renewed.
Film Insurance
Major motion pictures have a suite of insurance policies. 2021 was a challenging year for film insurance, between COVID-related production shutdowns, and the high-profile on-set gun death.
Moving into 2022, film policies are still available. Many have COVID exclusions, but the details differ from carrier to carrier.
The various unions have rigid rules regarding on-set testing, even for auditions. And many aspects of the film industry, such as auditions, have gone remote as a result of COVID.
Many policies have a large self-insured aspect, meaning that the first portion, perhaps $1 million in loss, would be the responsibility of the production company before the insurer steps in.
And with the on-set tragedy, intense scrutiny regarding handling of weapons, and even if fire-able weapons will even be allowed on set is going to be debated.
Even before this year’s accidental shooting, some insurers wouldn’t underwrite a film if a potentially deadly weapon was even going to be present — regardless of safety procedures in place.
Conclusion
The insurance industry will certainly see changes in 2022, whether that is in premiums, or even a return to more normalcy. Some lines, such as life insurance, have been relatively unaffected, while others, such as travel insurance, have been rethought almost completely.
Moving forward, COVID-19 or the indirect results of it, will likely drive many of the health care costs in the coming year. And getting the pandemic under control will be one of the keys to returning the travel industry back to normal.
One thing is certain, though — the entire industry is craving a return to normalcy so they can best price their products moving forward.
Michael Giusti, MBA, is senior writer and analyst for InsuranceQuotes.com
