Covid-19 Impact On The Insurance Industry | Media Won’t Tell You

14 min

Covid-19 Impact On The Insurance Industry

Seven months and counting.

Countries across the globe have been fighting for seven months to ward off the deadly virus.

Many nations like Vietnam and New Zealand have been declared COVID-19 free due to early action-planning while many countries are seeing what scientists call a ‘second or third wave of infections’.

But the common thing that all countries and people are seeing concerning coronavirus is that it does not discriminate based on class, race, caste, gender, or affluence.

The virus has the capability of neutralizing every human in its way. 

People are dying by thousands every day, and a vaccine is nowhere near in sight.

The World Health Organization says that the global hunt for a vaccine will yield positive results only by 2021.

The Covid-19 Impact On The Insurance Industry

The consequences of global lockdown are sending shockwaves to economies and are becoming a nightmare for Governments.

People are losing jobs, money, and in worst cases, even their loved ones to this virus.

Business Model Disrupted

The existing business model of the insurance industry may be a little flawed,  but it was a well-oiled machine until COVID-19 happened and highlighted all the flaws within.

The entire business model- right from selling their products to premium collection and disbursement of claims has been disrupted in this pandemic.

And the investment portfolios of insurance companies have also turned haywire due to the unstable stock market situation.

The current banking and financial system,  which has been pushed into a state of vacuity are adding to the existing problems of many insurance companies.

Staying and disbursing claims has become a struggle.

However, no one is talking about the struggles of insurance companies as a business.

Government schemes to help businesses amidst this pandemic have also done very little for the insurance companies who are working night and day to help individuals and families of those affected by a coronavirus.

COVID-19 Impact – Business Hit By Up To 30%

A report released by PwC stated that business had been hit heavily due to the coronavirus pandemic to the extent that money-making months like March and April have been dry.

While the sales for life insurance policies has taken a hit by 30%, other insurance policies have seen at least a 15% downfall.

March and April are the months where a lot of Corporations and individuals get their insurances done,  and that is how the insurance companies sustain themselves for the rest of the year.

However, people have cut back expenses and companies have taken significant cost-cutting measures to endure the economic blow due to COVID-19.

Insurance is not the number one priority anymore.

While health insurance and life insurance are still popular amongst buyers,  the other types of insurance pertaining to automobile, mobile property,  child, and many others have taken backstage.

Loss Ratio Plummets

Good news for insurance companies is that the losses for insurance companies have come down when it comes to insurance policies other than life and health.

Reduced loss can be attributed to the fact that the number of people opting for planned surgeries has come down by more than half.

People are only going to the hospital or visiting their doctor only in case of extreme emergencies.

The number of claims for all these incidents has come down leading insurance companies to save a little amount of money.

With lockdowns in place, accidental insurance, theft,  and damage claims have reduced manifolds which are saving insurance companies a lot of money.

Inquiries About Health Insurance Increased

family health insurance

A deadly virus is all it took for people to become concerned about their families suddenly.

The pandemic has instilled a sense of fear in the minds of people.

Insurance companies say that the phones have not stopped ringing in their offices as people are inquiring about the health and life insurance plans.

As the demand has gone up by 30-40%, people have never been more hell-bent on buying health insurance plans.

Consequently, many companies have had to increase and widen the health insurance premiums portfolio as the claims related to coronavirus are slowly running them dry.

Higher premiums also have to do with the probability of many such pandemics breaking out in the future which could drive insurance companies towards bankruptcy.

Motor Insurance – The Worst Hit

Motor insurance

The automobile industry has been the worst hit.

Pre-coronavirus as well, the car industry was barely hanging by a thread,  and the pandemic has worsened the problems for carmakers.

Consequently, car and motor insurers are also facing the brunt of it.

When there are very few car buyers, there are barely any buyers for car insurance.

The number of people opting to renew their car or automobile insurance has also come down, adding to the worries of insurance companies.

COVID-19 Impact – Boost In Life Insurance Demand

The demand for term plans has also grown, keeping in mind the circumstances.

People want to secure their families’ future financially, and the need to do so has become more prominent.

It is also being seen that many people are keen on increasing their life insurance cover and enhancing the sum assured to help their families if they are not around.

Delayed Premiums

The economic blow due to the pandemic is so huge it still cannot be assessed.

It has hurt countries’ economies, people’s pockets, companies’ budgets, and so on.

People have been forced to take a pay cut to keep their jobs, and many companies have had to let go of thousands of employees.

Hence, people have had to re-plan their monthly budgets and cut back on all unnecessary expenses until the worst of this gets over.

On-time payment of premiums is becoming a hard thing for many middle-class and low-income groups who run low on savings and are the worst hit by the pandemic.

Delayed premiums are becoming a common thing,  and a big problem for insurance companies as the number of claims seem to rise,  but the premiums are not coming in on time.

Surge In Claims

The deadly virus had claimed many human lives.

The rising number of deaths are becoming a problem for insurance companies as the number of people filing for life insurance,  and term insurance claims are steadily rising.

For the insurance companies who cover pandemic-related deaths,  coronavirus seems to be looting their accounts as the number of claims to be settled are rising.

It is not only the death claims that are on the rise.

People with health insurance are also filing for claims against hospitalization and quarantine stays.

Internal Refocusing On The Workforce

With very less money coming in and a lot of it going out as claims,  insurance companies have a lot to worry about.

Not to mention, they too have employees to pay salaries.

Insurance companies themselves had to let go of many employees as cost-cutting measures.

People working in the insurance sector have also had to take pay cuts.

From enforcing work-from-home to putting in place new protocols for coronavirus,  the number of things-to-do for insurance companies has risen.

COVID-19 Impact – Focusing On Digitization

Finance buddy Doctor

Insurance companies also had to re-strategize their work.

From selling insurance plans to interacting with existing customers and getting new ones,   the digitization drive for insurance companies has not been an easy one.

They had to do everything within a fortnight to ensure smooth working, which was a next-to-impossible task.

The ratio of bad news to good news for insurance companies has not been equal.

All of these things, coupled together have spelled doom for insurance companies with very little assistance from the Government.

Insurance companies are demanding quick intervention to help them stay afloat.

Mainstream media does not tell us a lot of things; but, this does not mean that problems do not exist.

Author Bio: Shriya Garg is the founder of ContentNinja, who always happens to go back to her roots as a finance professional.  Being good with numbers, she loves educating her team members on personal finance,  investment, and other things they don’t teach at school.

Jitender Sharma

Jitender is a finance geek with more than 10 years of experience in Credit Cards, Savings, & Loans. He is a Co-founder of FoundersBuzz a digital branding platform for small businesses and startups.

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