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The COVID-19 story is still being written, but many of its lessons are already coming into focus.

So far, we have learned that despite tremendous advances in medicine and technology, we still have a long way to go to eliminate the scourge of infectious disease. We have learned that a pandemic, and the response to it, can have dramatic ripple effects on global supply chains, healthcare capacity and utilization, and economic activity. And we have learned that the insurance industry’s important role in providing financial security for families in the face of uncertainty has never been clearer.

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Although it is impossible to predict how this story will end, we can identify some of the primary determinants that will influence its ultimate impact. Broadly, these can be categorized into three main areas: medical, financial, and behavioral.

• Medical influences include the epidemiological characteristics of the virus, such as its attack and fatality rates, as well as the capacity of the healthcare delivery system to identify and treat cases.
• Financial factors include the direct costs associated with fighting the disease and the secondary impacts on the economy, asset valuations, interest rates, and unemployment.
• Behavioral elements include the actions of individuals, governments, central banks, and regulators to slow the spread of the disease and mitigate negative consequences to the economy.

Understanding these factors is critical to assessing and preparing for the impact on the insurance industry. The medical factors will drive the cost of claims during the pandemic and will have a longer-term bearing on mortality improvement trends for many causes of death. The financial components will impact asset portfolios, investment returns, and capital levels. And the behaviors of various stakeholder groups in the insurance industry will drive dynamics including demand, benefit utilization, and fraud.

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These factors are interconnected, but the key cog in the gears is behavior — and the key ingredient in driving the net impact of those behaviors is trust. Can citizens trust their government leaders to make responsible decisions to slow the spread of the disease? Can governments trust the advice and projection models provided by epidemiologists, virologists, and data scientists? Can employers and investors trust policymakers and central bankers to forestall a prolonged economic downturn?

For the insurance industry, the role of trust is also magnified during this crisis. The actions of insurance companies, consumers, intermediaries, regulators, and ratings agencies will likely be viewed skeptically by one another. Insurers will be concerned about fraud and adverse selection. Regulators will be concerned with how insurers are managing their capital and investment portfolios. Consumers, policyholders, and intermediaries will be concerned about being treated fairly during challenging financial times.

• See also: The COVID-19 Pandemic: Insights and Implications for Insurers
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Summary

The success or failure of insurers and reinsurers during this crisis will be measured by how we build and guard trust with society. We can provide financial resilience during challenging times, we can reaffirm our social purpose, we can act ethically, and we can innovate to meet the evolving needs of consumers. If we fail to do so, trust that has been built up over decades can be quickly eroded — but if we succeed, there is a brighter future ahead after these dark times.