IN THE KNOW

The Covid-19 crisis is changing the world in many ways, some of them expected and others less so. So how is the insurance sector as a whole faring?

INSURING RISKS IN A CHANGING WORLD

Insurance is all about establishing the likelihood of an insured risk happening, then underwriting that risk accordingly. The problem is, when the world we know is changing so dramatically, and in fact, might never revert to 'normal', how do underwriters accurately calculate risk? How do we determine the sum insured to avoid over-insurance or under-insurance in this strange new world? How can loss adjusters keep up?

Trickier still, the insurance protection needed by individuals and businesses might change altogether. In the near future, for example, business interruption insurance might need to include cover for one-off Covid-19 lockdowns. We've already seen outbreaks happening, across the world, in meat processing factories and other businesses where a lot of people work in a closed environment.

Business interruption insurance might need to include cover for one-off Covid-19 lock-down

SERIOUS UNDERWRITING ISSUES

How do underwriters assess the risk of a random spike affecting a business? The problem for insurers is the long term uncertainties we face. Right now we just don't have the information or insight we need to calculate the new risks we face accurately. The same goes for insurance terms and conditions. It's very hard, if not impossible right now, to figure out what should be covered and what shouldn't, what to insure and what to exclude, based on which parameters.

PREDICTIONS FROM THE WORLD'S INSURANCE SCENE

Health insurance premiums are expected to increase towards the end of 2020 as Covid-19 impacts the world's private health systems and increasing numbers of consumers, struggling to cope financially, terminate their cover. In many countries, people are still not using their cars, and haven't used them for months. It wouldn't be surprising if vehicle insurers started to see customers cancelling their policies, either for a short time or permanently.

NEW AND INNOVATIVE INSURANCE POLICIES

At the same time, there are innovative new policies with interesting new terms and conditions emerging around the globe. In the UK one company has introduced a business insurance policy covering travel agents against cancellation costs if a customer can't travel because they have tested positive for Covid-19. The policy lets the travel agent change the booking and recover any extra costs they had to pay out because of it, and it could prove a business-saver for struggling companies in the travel sector. In India, Bharti AXA Life Insurance has revealed plans to offer a comprehensive Covid-1plus health and critical illness product. The policy offers inclusive protection solution with triple benefits: life cover, hospitalisation, and critical illness amid COVID19.

LEGAL CASES AGAINST INSURERS ON THE RISE

We're also seeing a flurry of insurers around the world being sued for not paying out on Covid-19 related claims. The Irish Central Bank has said it expects insurance companies to "absolutely pay up" on business interruption claims. We're seeing similar legal actions throughout the USA, in Africa, in the UK and many other countries.

It's very hard, if not impossible right now, to figure out what should be covered and what shouldn't, what to insure and what to exclude, based on which parameters.

Photo by Wesley Tingey on Unsplash

WILL THE INNOVATORS WIN?

In a gloomy economic climate like this, with the biggest global recession the world has ever seen coming our way, the strong will survive. We predict the insurers and intermediaries who can flex, change, and innovate to meet the new demands of customers post-virus, will survive. Some may even thrive.

Whatever happens, we're with you all the way.