Preferred Reports Inspectacast

Doing inspections in a pandemic...

May 22, 2020 Tom LeGros Season 2 Episode 1
Preferred Reports Inspectacast
Doing inspections in a pandemic...
Show Notes Transcript

Inspectacast sponsored by Preferred Reports

Insurance Inspections During a Pandemic

This episode covers:

Is insurance really essential?
Are insurance inspections needed in a pandemic?
How can inspections be conducted safely?
What's the impact of the pandemic on the inspections business?

Working Script for Inspectacast Season 2 Episode 1- FINAL Copyright 2020

Release Date- 5/22/2020

Title- Insurance Inspections During a Pandemic

Caster- Tom LeGros

Guests- None

Media- MP3

Distro Channel- Buzzsprout Site for Inspectacast

Producer- Windowless Studios Atlanta

 

Good day everyone.  It’s great to be back with another season of Inspectacast.  Our first “season” was a while ago and let’s face it, things have been a little busy.  The virus interfered with our schedule from the start and now, several months down the line, we’re still dealing with the virus and the destruction it brought to the world. While things are improving, the world has not seen something like this in almost a century. It’s new for just about everyone alive now.  Sure, we’ve had recent pandemics and are still in some. HIV has been considered a global pandemic since the 1980’s.  We’ve had influenza epidemics and pandemics with the most recent being H1N1, known as the Bird Flu in 2009-10, and which you now get vaccinated for every flu season.  The Spanish flu is the pandemic most mentioned recently and that was in 1918 and killed an estimated 50 million people globally within a little more than a year.

Fortunately, the new coronavirus, called SARS Cov 19  is not as bad as the Spanish Flu, but it is still more deadly than the average seasonal flu and can spread quickly, especially in densely populated areas. The death rate is inexact as there are so many symptoms, and some with no symptoms that could have been killed by COVID-19, the disease cause by the virus. 

I could go into the disease more, but I think by now everyone has been fully briefed on COVID and the need to take precautions to protect themselves and others. Instead let’s focus on specifically what we do and that’s insurance inspections. We’re going to look at how the pandemic is impacting our inspection operations now and in the near future. We’ll look to answer the questions: Are insurance inspections really essential, what are the risks, and how can those risks be reduced so inspections can proceed safely?

Let’s answer the why do we need to do inspections during a pandemic question first.  

We’ll examine this from a risk management perspective, and for that I’m going to need to put things into context for the non insurance listeners. 

There are different types of risk but for our discussion we’ll focus on pure risk.  Pure risk is the chance of something happening, or not happening.  Its on/off, yes/no, true/false. That means either a thing happens to you or it doesn’t.

There are several ways to deal with risk.  Avoiding it entirely is the first option.  If you never skydive you will never run the risk of your chute not opening.  However, risk avoidance is not always possible.  We all would love to avoid being hit by a meteor but there is really nothing we personally can do to reduce that risk. It either hits or it doesn’t, though we can hope the government has some means to reduce the risk of it ever happening. The world is too interconnected to avoid all risk.  Even the most rural counties in the country have been touched by Covid.

There’s risk reduction where you actively think of ways to reduce your risk and then use those ways. For instance, you want to drive so you take drivers education. Your education and training should provide you with some additional skills which make you a better driver.  That means you have reduced your overall risk of an accident. In fact, auto insurers give people credit for taking drivers courses like these because their data shows people with drivers ed are involved in fewer crashes. The lower the risk, the lower the cost to the insurance company which is then passed on to the insured in the form of a premium reduction.

Perhaps the most common way people and businesses handle risk is to get someone else to take on the risk for them. This is true when a peril has a value which can be measured in money lost.  This is called risk transfer and it occurs when someone buys an insurance policy.  The insurance company takes on the financial risk of an event thereby relieving the insured of the potential financial losses from something happening.  Since a pure risk is loss or no loss, this transfer can work.

But what risks are transferable with traditional insurance?  There’s a few basic things that have to be present for a risk to be considered insurable. And I’m simplifying things a bit here in the interest of time.  

The first is it must be an accident.  The insured themselves cannot have intentionally caused the loss.  A person cannot set fire to their own business and then be paid for the loss, at least not legally since this is arson and insurance fraud. Someone else unrelated to the insured can burn the building down for whatever reason and that will be covered, because there was no intent to do so from the insured. A neighbor’s negligence could start a fire in their own building which then spreads to the insured’s building.  Again, that would be a covered loss.

Next, the event or peril causing the loss must be predictable and quantifiable. This allows insurance actuaries to calculate the probability and severity of a loss event and from this they can calculate the premiums needed to finance an insurance program which covers the peril. 

The loss also cannot be catastrophic (at least for non-catastrophic coverage) which means the event which caused the loss happened at a certain point in time and was short lasting with a predictable end. A fire will end when the building burns down, and while a few other buildings may burn, the entire region won’t. 

However, something that is hard to predict, or is even unknown to be a risk, and effects a large area or population is not something insurable with regular insurance. This would include property damge from a war, civil unrest, and so forth.  Viruses are not typically covered by property insurance policies.  They don’t fit the definition of an insurable risk with traditional insurance. We don’t know when a pandemic might happen, in fact the virus we are dealing with now has never existed in humans before, and every country in the world has felt its impact.  Property was not physically damaged so many of the business interruption coverages were not triggered, and further exclusions would cause government ordered shutdowns to also not be covered. This is because it is hard to foresee such things and predict how long these things last.

So now we understand what risk is and what risks are insurable in ordinary home and business policies. Now to address the idea that insurance inspections, and insurance in general are essential in a pandemic. And we will do that right after this message.

((Break))

Welcome back. We are discussing why insurance inspections are needed, even during a pandemic like this one. We covered what risk is, how it can be handled, and what risk can be insured with conventional homeowners and business policies. Now why are insurance inspections needed during a pandemic?

Well the easy answer is the clock never stops for risk.  Just because we have a virus now does not eliminate your other perils.  It may reduce some loss exposure because less people are driving and less people are working so auto accidents are down and workers comp claims are lower, but the threat still exists. This means insurance must be available and remain in force.  Remember, an insurance policy is a contract that covers the insured for a period of time, typically a year, for their covered losses.  This does not go away just because we have a pandemic.  This is why insurance is considered an essential service and our inspectors are essential workers. Without access to insurance, businesses could not operate without exposing themselves to serious losses. People could not buy houses, or finance cars, since insurance is required for all those transactions, too. It’s not even legal to drive a car without insurance.

When you go into your agent’s office or go online to get a policy, you file an application and it’s reviewed by the agent or the agent’s staff.  They check the policy to make sure what you want to insure meets the underwriting rules for the type of policy you want or they think you need.  They may check credit reports or ask for business references.  They will look at prior losses and speak with you about your business. Provided everything checks out, they can issue a binder, which provides coverage like a policy, but the company backing the policy now has time to review the information and make a final decision to insure or not.  This is the underwriting discovery period and it varies from state to state and can be generally 30 to 90 days. This is needed because independent agents, while commissioned and empowered to issue binders, cannot completely commit an insurance company to a policy without the insurer making sure there are no obvious problems.  A good example would be the insured says they want to insured a towing company with just one truck when in fact they have 10 trucks and the other 9 would be running without insurance. This is an extreme example, but as you will see, without an inspection, the insurer would be on the hook for a far higher loss potential than originally thought.

When the policy is sent to the insurer, an underwriter will review all of the documents submitted with the policy application.  They will make their own inquiries to databases, credit bureaus, and insurance loss systems.  And they will order a physical inspection of the property or business. 

This means a person will come out to your home or place of business, interview you, walk around and take notes and photos, and submit a report back to the underwriter. This is the only part of the process where the underwriter has the chance to look at what is being insured. These physical inspections are critical to the underwriting process and are mandated for most risks by the carrier or the reinsurer. If things don’t line up right, the insurance company can cancel the policy and the customer will have to find coverage elsewhere. If they don’t cancel the policy in the time period allowed, the insurer must honor the policy until it renews. If the insured is later found to have misrepresented themselves, the insurer may be relieved of covering any losses, but that involves the additional expense of litigation and should best be avoided by doing what needs to be done at the start.

Even with the pandemic and all the things suspended by governments, the policy discovery period can still run, meaning the insurance company is under the gun to get all their documentation to make a good coverage decision. Even if postponed or extended, the insurer is still covering the losses an insured may incur during the discovery period. So sooner is better when it comes to deciding to cancel a policy.

Now, there are other ways to inspect, and Preferred Reports is one of the national leaders in innovative digital inspection products, but as we tell our clients, there is simply no substitute for physically visiting a risk during the discovery period, especially for a new policy on a new business with no claims or payment history.

So, Yes, insurance is considered an essential service so things like the shelter in place restrictions don’t apply.  We need to get out, and cautiously inspect properties and businesses as best we can in whatever conditions we can safely operate. Let’s look at the things inspectors and inspection companies can do to safely operate during a pandemic.

((Pause-Sting))  

Let me first say that our suggestions are not medical or legal advice.  They are based on the current CDC guidance, which has been known to change, and we also don’t have the time here to teach some of the things we suggest.  

So, we need to get inspections done and we know there is a bad virus in the community. What kind of precautions can we take to make this all work?  

It starts with education and situational awareness. Inspectors need to take the time to familiarize themselves with the threats they face and the actions which minimize the risk to themselves and others. They need to have the information to decide for themselves if they need to stay home, or only do inspections which do not require contact, such as exterior inspections. Many resources are available online including free training a the CDC site and the World Health Organization site.  Inspections specific training can be found with InterNACHI, the home inspectors group which created an excellent resource they offer free on their website. 

Once they feel they are informed and ready to face the threat, they need to check themselves first.

 

What I mean is the first thing you need to do is see if you are sick.  Any fever, chills, flu style symptoms, sudden loss of taste or smell? Well you could be infected and need to stay home for now or seek medical assistance.  You can get a test, and it’s easier now than it was when this started. If not, you need to quarantine yourself and follow the CDC guidelines or your doctor’s directions for when to go back out again.

Another self check is to see how you match up to people we know don’t do well when they catch COVID.  If you are over 60 or medically compromised, you could have issues. People considered at high risk are the elderly, obese (BMI>40), diabetes, respiratory issues, high cholesterol, high blood pressure, and you have an even higher risk if you have more than one of these issues.  Likely if you have one of these conditions, you will have one or more others to go along with it. This means you must consider the risk of contracting the virus as you work. Also, don’t overlook your family.  If you have anyone at home who would fall into the high risk category, you could potentially expose them, and this needs to be factored in too.

Once you pass this self check, and it’s one you should do before going out each day, you can proceed with the work at hand.  You may have no contact exterior work and that would be very low risk to do.  Interior work may be a little trickier, but here are some suggested steps you can take to minimize your risk and get the job done.

The CDC has outlined in detail what should be done to avoid being infected or infecting others. It comes down to a few critical things.  First, the virus likes people.  In fact it needs people to live in and make more of the virus.  It’s spread from person to person through the transfer of “respiratory droplets”. That means someone close by sneezes while you breathe in and bam, you could become infected. The more exposure you have at one time to the virus, the greater the chance some of the virus you inhale will survive to infect your cells and make more. But, unlike many colds, this virus can exist in people who are perfectly healthy and have no idea they have become a virus factory. That means you should assume everyone is infected and act accordingly.

The bug likes to be up close and personal so you need to think about keeping a good distance from others.  The CDC recommends 6 feet. For inspections, if you have people showing you around, stay at least 6 feet apart and 6 feet away from workers, residents, or anyone else.  Face masks are suggested, and in some states required. The mask is not there to prevent you from getting the virus, but keeping you, and others, from spreading it. You don’t need to use a surgical grade mask, but you should not use the same mask all day long, rather it should be changed after each visit. You also just can’t take it off and throw it in the back of your car.  It needs to be disposed of properly, and if reusable after cleaning, it needs to be stored in a sealed container until you can get the masks cleaned. If you handle these things with your bare hands you are potentially contaminated. I suggest you watch a video on putting on and taking off gloves and face masks.

If you do happen to make a mistake with a mask or glove, not to worry, remember the virus likes your lungs so you need to make sure to keep your hands away from your face until you can wash them with soapy water or use a hand sanitizer with at least 60% alcohol.  Don’t get into your car with your gloves and mask on and drive to the next place, because now the virus has hitched a ride with you and you get to play rideshare for the Rona, spreading it wherever you go.

When you finish your day, you should clean down the surfaces of your car.  Things like your steering wheel, gear shift, turn signal, radio and ac controls, etc.  You get the point. Use a decent cleaner and since the virus does poorly in heat and direct sunlight, old mother nature should kill any ride along germs in the car when its parked and closed with no AC in the summer. That’s not a CDC recommendation-but research shows the virus dies quickly in heat and direct sunlight which occurs in your parked car all the time.

Now let’s talk about the actual visit.  Here are some pre- visit steps you can take.  

When you call for an appointment, ask if anyone at the location is sick or has been exposed to someone who had COVID.  If they have, you should check back with them in a few weeks and move on to the next call.  If not, set the appointment and tell them what precautions you will be taking while you are inside. Tell them to call you if anyone becomes ill or is exposed before the appointment. That way you can reschedule the appointment and avoid unnecessary contact. Keep your client updated so they know progress is being made and the delay is because of the precautions being taken.

When you show up for your scheduled appointment, put your mask on beforehand, and if you wear gloves, those too.  Don’t shake hands and ask them one last time if anyone is sick or has been exposed.  If it’s still no, then proceed. You might want to handle the outside part first so that way you can remove your gear once you leave. It’s better that things that are inside stay inside.

Moving quickly through an inspection may seem like a good thing, but speed can lead to mistakes like a torn glove, your mask falling off, exposing you to the virus. Don’t want to rush and miss getting all the info needed and the photos.  You may want to take more photos than usual and use the pictures for notes instead of carrying a bunch of stuff inside. You may need to set up another appointment and run the risk of exposure again.  

Once you complete your visit and exit the building, carefully remove your mask and gloves and wipe down your phone or camera and wash your hands or use hand sanitizer. Be careful with your pen and notepad too.    You can then move on to the next appointment safely.

Remember, if anyone you visited is found to have been ill during your visit, you may be contacted by the health department and told to quarantine yourself.  This time is different for essential workers and you should advise them you are an essential worker so they can better inform you of the time needed to be cleared. It could be illegal to not follow a health department’s orders so be sure to seek advice from your doctor or health department if you think what you have been told was incorrect.

 

So how long are we going to have to work in these conditions?  No one really knows.  Obviously, we can’t stay shut up in our homes forever. Life needs to go on and, all politics aside, our economy was not built to be shut down for any length of time. Infection is something we deal with daily without even thinking about it.  We inspect during flu season, and we go into hospitals and nursing homes all the time. But we all can use this as a reminder to take some basic precautions to protect ourselves and our families. As essential workers we need to make sure we follow our local laws and regulations as well as CDC guidance to safely operate in a pandemic.  If we all use some common sense and remember the basic prevention steps we discussed, we should all be fine and be able to conduct inspections as safely as possible.

Has this impacted the insurance services business?  We at Preferred did see a decline in ordering but that has since reversed itself.  We monitor the situation in the field daily and strived to keep business as normal as possible.  We’ve completed inspections in every state and continue to do so.  Our belief is the insurance industry is strong and is a critical part of the nation’s recovery from the pandemic so we don’t believe the future is as bleak as the media has been portraying.  We don’t believe in some kind of new normal, we simply look to keep things as normal and steady as possible by providing our clients with the best service and to inspect as safely as possible.

Our next edition of Inspectacast will examine the impact of digital inspection products on the insurance inspections business. This pandemic has caused an acceleration in digital products like self assessment applications that seem to be growing in popularity.  Be sure to listen in when we cover what we think will happen as the very conservative and hard to change business of insurance makes a digital pivot and finally moves into the 21st century.

Thanks for listening.