Every now and then, something new and shocking comes out about coronavirus. Almost every country has been affected by this illness, and if we talk about the insurance industry, it is no different. As per the source:
- Every US state has confirmed at least a single case of coronavirus.
- 105 death cases and 5,700+ confirmed coronavirus cases have been registered in the U.S.
- The government is allocating funds to support industries in this great health hazard time.
- For almost 30 days, The European Union has chosen to close its borders.
- Going by the global coronavirus cases, the numbers have gone up to 218,000.
Another report by Financial Times has stated that life, business, and travel insurance are the ones that have been affected the most. However, a lot of insurance policies have exclusion for pandemics and epidemics.
Can Insurance Help You?
You would have to consult your broker/insurer about whether or not your current policy supports you during outbreaks. In the past, due to outbreaks like Zika in 2015, Ebola “West Africa in 2014, and SARS in 2003, insurers have made a lot of changes as far as providing insurance against outbreaks is concerned.
Unemployment- The Main Coronavirus Risk!
As per Jefferies analyst David Windley, until the epidemic becomes so bad that it affects the economy and unemployment, investors are unlikely to consider taking any major decision against coronavirus. He also stated that as of now, coronavirus is more of bad flu, which has not affected businesses at large. Yes, there are certain industries like health which have got affected since people are avoiding going to the hospitals owing to the risk of contracting the virus.
Insurance Industry- The Key Factors for Consideration
If we look beyond public health, cancellations in the form of travel and events, along with the revenue loss is increasing day by day. As far as claims are concerned, they will depend on individual situations, policy nature, and new changes to the underwriting process. So, let’s get started and figure out the important insurance aspects that all stakeholders- brokers, insurers, and the insured should focus on.
1. Interruption in Business
Just as we discussed above, that many businesses had suffered losses as a result of coronavirus, especially the hospitality industry, whose revenue is completely dependent on the travelers. Also, the supply chain has got affected at large owing to access denials, staff absence, sickness, or more.
Now, as far coverage for such types of business interruptions (including contingent ones) is concerned, it is more of property damage. This means that policyholders may have specialized extensions for supply chain insurance that covers contingent business interruptions that get triggered by events of non-physical damage such as access denial or infectious diseases.
Specialized Interruption in Business
Although traditional policies do not cover financial losses arising out of pandemic, a lot of specialized insurance products are available for the same.
- Health Care and Hospitality − For Infectious and Communicable Diseases
This type of coverage is specially designed for meeting the losses as a result of a halt in operations in the health care and hospitality industry due to infectious and communicable diseases.
- Pandemic-Specific Exclusions or Coverage
This type of coverage is designed for meeting losses as a result of pandemic events. In May 2018, Munich Re and Marsh collaborated, along with Metabiota (a risk modeler for epidemic events), for the launch of a fully integrated coverage product for pandemic events, PathogenRX.
With this, businesses can assess the potential losses in advance and prepare for dealing with the outbreak through meaningful analytics and Munich Re’s underwritten policy. This policy is customizable and is tailored for particular business expenses, Insurance Journal (May 22, 2018).
- Civil Authority Coverage
This type of coverage is designed for meeting losses that arise out of limitations of business operations owing to the orders of civil authority. This type of coverage also varies as per the of specific business needs of the owners and the type of loss incurred. Also, Civil Authority Coverage may be issued by insurers on a manuscript basis, which is custom in nature, and addresses owners’ particular needs as per the voluntary or mandatory orders, disease, expenses, geography, and more.
2. Liability Insurance
Now, there are some policyholders who have to bear the liability of protection failure against infection exposure on their premises. These policyholders typically include healthcare, hospitality, and transportation professionals. Policies for general liability cover property and body injuries, but to have a legal defense supporting you against such claims, opting for policies under Commercial General Liability makes more sense.
3. Workers’ Compensation Insurance
These insurance policies are an extension of the benefits associated with any injury during the employment course. If an employee or employer is working in a field that is directly or indirectly related to coronavirus, he/she should do record-detailing against the identification of such potential exposures.
4. Coronavirus and Event Cancellation Insurance
A typical event cancellation policy will cover financial losses incurred as a result of event cancellation, relocation, or postponement. Try having an endorsement in place to add to your policy against communicable disease. It is recommended to double-check the same with your broker and know in detail the precautions you have to take against such kinds of exposures.
The Pandemic Preparation
German reinsurer Munich Re collaborated with the World Bank to start a pandemic scheme in 2017 for preparing for the future. However, insurers too, are following this and preparing policies that cover the same. This is what led to the creation of a pandemic risk insurance policy by Munich Re.
As per Oxford Economics, if coronavirus becomes as dangerous as swine flu in the future, it will likely cost the global GDP almost $1 trillion. Going by the estimation of McGowan, a leading insurance firm, insurers do not have the past history records to get fully prepared. They are just charging heavy premiums in order to face the future pandemic challenge.
A Key Focus on Travelers
As per the Tourism Economics report, a data shared by CNBC, almost $24 billion will be lost by the U.S. travel and tourism industry, if coronavirus continues to grow like this.
Insurers play a huge role in the life of travelers who are thinking of changing their plans and the business owners whose supply chains have been affected by coronavirus.
For instance, Allianz Travel Insurance is providing claims to the travelers for trip cancellation and medical care issues related to coronavirus. This benefit to travelers has been granted under their Emergency Medical Care and Emergency Medical Transportation insurance package.
Apart from this, travelers having Trip Cancellation or Trip Interruption insurance can cancel their trip in case they get ill as a result of this disease prior to or during their trip. An additional benefit in the form of travel expenses will be provided to travelers of South Korea, mainland China, or Lombardy or Italy’s Veneto regions. This coverage is limited to the departures before April 1, 2020.
Focusing on Businesses and Life Insurance Providers
Most of the businesses in North America have started to prepare themselves against the coronavirus outbreak. They have become more lenient towards their employees with respect to their sick leaves since they do not want to stay safe against coronavirus within their organization. With the number of deaths rising due to COVID- 19, most of the life insurance providers have faced a lot of losses owing to the related policies and a collapse of bond rates.
Insurers Agreed for Diagnostic Tests’ Cost
A lot of insurers have agreed to pay for the bills of diagnostic tests for coronavirus. They have taken this step to see whether or not their insured people have this disease. However, this coverage excludes the cost of the treatment of coronavirus. For example, Humana Inc. and UnitedHealthcare Group Inc., two leading Medicare Advantage plans’ providers have supported the diagnostic tests’ cost for coronavirus.
Tracking of COVID-19 Claims to be Made Fast by Insurers
The Insurance Commission has asked the insurers to speed up the tracking of the COVID-19 claims.
A Circular Letter, numbered 2020-13 has been issued by Insurance Commissioner Dennis B. Funa on March 16, listing the guidelines to make the claims management policies stronger of health maintenance organizations (HMOs), mutual benefit associations (MBAs), and insurance and reinsurance firms. – Source
Insurance Firms Recommended Minimizing Employees’ Travel
As per the Financial Supervisory Commission’s (FSC) Insurance Bureau, insurance companies should restrict their employees from traveling owing to the virus contraction and reducing the number of imported COVID-19 cases. – Source
This brings us to the conclusion that almost every business in the world has been affected by the impact which coronavirus has created. In the case of the insurance industry, the providers of travel insurance and life insurance are at the major receiving end. If coronavirus continues to grow like this, it will lead to more losses for the insurers in the coming future.
Insurers were already overwhelmed by their huge back-office workload, and with the coming of coronavirus, it has simply manifold. Are you as an insurer feeling the same burden amidst the outbreak of coronavirus? If yes, you need not worry as the proficient team of Insurance Support World is there to support you. We have been providing insurance back-office outsourcing solutions to firms worldwide. Get in touch to start your 14-day free trial.