Frank Pennachio has more than 30 years of experience in the insurance industry as an agency owner and producer. In 2009, he sold his agency and co-founded Oceanus Partners, a ReSource Pro company. He is now a full-time trainer and consultant to insurance organizations.
Deepening recession brings new and old challenges
It’s official—we’re currently in a recession. In a previous post, I debunked some of the myths about how recessions impact insurance. Now let’s dig into the very real insurance risks that insurance professionals need to steer clear of and help their clients navigate as well.
As the U.S. grapples with the effects of an ongoing pandemic, a deepening recession is amplifying old challenges and introducing new ones. From workers’ compensation to cybercrime, here are five emerging insurance risks you should be aware of.
In our last recession in 2008, internet fraud saw a 33% increase compared to previous years, with losses reaching a record $264.6 million. Cybercrime appears to rise during economic slowdowns, when businesses can be particularly vulnerable. As companies look for ways to cut spending, cybersecurity is often neglected or undermined. Layoffs in IT teams and even employee stress can lead to increased cyber vulnerability.
Increase in workplace injuries post-recession
In the previous post, we discussed how workers’ compensation claims generally decrease throughout a recession. This is due to a variety of factors, including a smaller workforce and lower percentage of inexperienced workers. On the other side of the coin, this means that claims will likely see a sharp rise toward the end of the recession, as employment and production increase.
Reduced workplace safety
While workers’ compensation claims may see an overall decrease during a recession, this does not necessarily mean that workplaces are safer. Like cybersecurity, safety measures are often the first to go when money gets tight, and even if accidents aren’t being reported, it doesn’t mean they aren’t happening. Research suggests that workers may actually refrain from reporting accidents during a recession out of fear of losing their job.
Increase in employment related lawsuits
COVID-related lawsuits remain a significant concern for employers. Some states have sided with employees and created presumptions that the workplace is the source of any COVID-19 infection. In other states, employees must provide proof that their infection occurred at work.
In both cases, employers will need to maneuver carefully to avoid claims of negligence, and many companies are implementing strict guidelines to increase safety and reduce liability, including plexiglass barriers, face masks, and social distancing.
Mental health impact on the workforce
A recent report by McKinsey found that at least 75% of individuals nationwide are feeling stressed by the pandemic, with Gen Z and millennial employees feeling the most hard-hit, according to a July Metlife survey. As the deeper effects of the recession begin to be felt, employee mental health will become an even greater concern.
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