How has the UK insurance industry reacted to the impact of Coronavirus? More importantly, how will this change the market in the UK in the longer term as businesses close, taxes rise next year to repay government support and the insurance sector copes with public criticism on virus exclusions? IE takes a look.
COVID-19 isn’t finished with us yet, that’s the bad news. Pandemics have a long track history of coming back just when you think things are safe and we may well face restrictions on travel, working in close proximity with others or our social lifestyles for the next year.
On the upside, there is a huge effort to develop mass testing and a vaccine. In fact AXA recently announced that it was donating some five million euros to an EU cross-border project to speed up research into a viable vaccine. The French insurance giant also stated that it was putting 200m euros into a fund to assist small companies and the self employed – just one example of how insurers are responding with hard cash, not just fine words. IE magazine has also covered Personal Group’s position on paying out on COVID-19 claims for ALL its policyholders who need to stay in hospital. No exclusions, no quibbling, just doing the right thing.
But the fact remains that most Travel, Business Interruption and Critical Illness policies exclude pandemics – and all their social consequences – as part of their standard exclusions.
Graeme Trudgill from broker association, BIBA, noted that the industry was getting `hammered’ with criticism over rejected Corona claims, but rightly pointed out that brokers and insurers simply cannot pay everyone a sum of money when a virus strikes, because ultimately only governments can compensate after pandemics. This blunt truth hasn’t gone down well with the wider public of course who have been especially critical on social media.
There’s little doubt that the UK insurance sector faces a long battle to rebuild trust, but how can we solve this problem?
Bruce Hepburn, CEO of Mactavish recently issued a statement which is something of a rallying cry for reform, and a new social contract;
“As we look to get our economy and industry back on track we must begin to focus on the only thing that can guarantee our long-term sustainability and good reputation, a culture that puts the needs of the policyholder first.” Hepburn told the insurance press,
“For us, this means returning to some of the things we used to do so well: taking the time to understand the risks our clients actually face, drafting and adapting policies so that they actually do the job as described on the tin, and paying legitimate claims in a timely and hassle free manner. Every crisis brings an opportunity and while we may be focused on the day-to-day business of commercial survival, I would encourage the industry to look up and consider what it wants to stand for in the future.”
LIFE, ILLNESS & TRAVEL: RETREATING FROM RISK ISN’T THE ANSWER
The first reaction by most Life and Critical Illness insurers has been to form the wagons in a circle, as a round-up of news on the I’m Insured website demonstrates, although companies like Met Life and Royal London said they had no pandemic exclusion in their Illness coverage. Many other insurers rapidly re-wrote their Life and Travel policy terms to exclude future virus epidemics. That makes sound business sense on the face of things, but is it going to win over customers in the long run?
Gwilym Pugh MD at I’m Insured told Insurance Edge that brokers who already specialise in finding cover for individuals that don’t fit the standard comparison site quote engines, can be part of the solution when it comes to new products;
“Technology has changed the industry a great deal in the last few years, so many policies are now underwritten by data. The sifting of tremendously varied, and enriched data, can factor in rare events such as pandemics in the future. People are ultimately buying something from a company or person that they trust – they have to believe that the policy stands for something when things go wrong. If we offer clarity, then we can win trust.”
A recent editorial in the FT pointed out that insurers shouldn’t use T&Cs to escape paying Business, Travel and Illness claims this year, even if it meant reducing their solvency in the short term. The FT also suggested that a partnership between government and the insurance sector might be a way forward in terms of covering risk, adding;
“Lloyd’s of London, the insurance market, has a proud history of insuring any conceivable risk — at a price. It should play a role in any solution, but a state backstop may be required. Like terrorism and war, insuring pandemics may prove such a vast risk that public-private partnership is the only answer.”
In the UK we are lucky to have free healthcare via the NHS, which might not be 100% perfect but it is always there 24/7. For the insurance industry to effectively sell healthcare or illness protection policies beyond that State care, we need to offer crystal clear terms on what is, and isn’t covered. Otherwise who would buy it?
Deborah Frost, CEO at Personal Group commented on the Life/Health insurance issue to IE magazine this week;
“Employers must make sure the workforce feels safe and supported. They may need to get policies in place – fast – to make sure employees have peace of mind. Insurance companies need to evolve their offer to plug any gaps. For example, we have introduced emergency employer-paid insurance and free policyholder access to a 24-hour GP. We also need to recognise the needs of the contingent workforce – zero hours, agency and temporary workers. This group can fall through the cracks for employer-paid insurance; it’s key that employers widen their lens to consider expanding coverage.
“Life will look fundamentally different post-coronavirus – but in times of change can come great innovation. Whether that’s finding new ways to reach a remote workforce, or introducing policies which address life events no one had ever even considered before.
“The industry cannot continue to do what it has always done. It will need to adapt to meet a growing need among workers to feel more financially secure.”
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