Marsh USA Inc.: Challenges of Pandemic Insurance in a COVID-19 World
(6 pages of text)
Case (Pub Mat)
In 2018, Marsh USA Inc. (Marsh), an insurance company based in New York, launched an innovative pandemic insurance product called PathogenRX. However, until the outbreak of the COVID-19 pandemic in 2020, there was no demand for the product. During the pandemic, some US businesses attempted to claim benefits for business interruption losses from their insurers but were denied because their policies did not cover pandemic losses. Unlike other catastrophic events, pandemics seemed to be uninsurable. In May 2020, industry experts estimated that US small businesses could lose up to US$431 billion due to the COVID-19 pandemic. Marsh’s chief executive officer wrote a letter to the United States Congress and president requesting that a state-backed pandemic insurance plan be developed to help cover extremely high potential claim amounts. The federal government could act as a reinsurer and prevent the US insurance industry from collapsing due to increasing claims from US businesses. However, there were several lingering questions: What challenges could be faced in selling pandemic insurance and how could these be resolved? Was it preferable to partner with a government or a private reinsurance partner? How could pandemic insurance modelling be improved to better forecast potential premiums and claims?
This case is intended for undergraduate- and graduate-level courses on strategic marketing, public policy, insurance and risk management, and strategic management. It deals with the challenges that insurance companies face in developing products to insure against a pandemic, for which the potential losses are difficult to estimate. It also explains the role of government and private companies as reinsurance partners and discusses the development of an insurance product and its value proposition. After working through the case and assignment questions, students will be able to do the following:
- Critically analyze drivers and resistance regarding specialty insurance products.
- Compare and contrast the roles of government and private companies as reinsurers.
- Analyze the development of specialty insurance products.
- Evaluate the value proposition offered by an insurance product.
Finance and Insurance
United States, Large, 2020
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