No crisis is an isolated, neatly contained incident, and the COVID-19 outbreak is exceptional by any standards. It comes with extreme scope and levels of uncertainty. For the insurance industry specifically, the fallout from the COVID-19 outbreak includes a surge in health, travel, and business interruption claims, pressure on sales from reduced business activity, and less use of face-to-face channels.

 

Obviously, life insurers have seen an increase in claims because of the excess deaths caused by COVID-19. Long-term care insurers have experienced reduced claims and a higher rate of policy cancellations as economic hardships have reduced disposable income. In the disability space, rising COVID-related claims were offset by decreased claims for injuries and surgeries as policyholders hunkered down at home and cancelled medical appointments.

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Furthermore, in the personal auto lines, claim frequency dropped dramatically while claim severity increased. According to Insurance Information Institute estimates, for example, property damage frequency was down more than 30% while severity was up by nearly 20%. This is because those empty and open roads encouraged many to drive more quickly and recklessly. Besides, the American Property Casualty Insurance Association estimates that insurance companies have refunded more than $14 billion of personal auto premium rebates to policyholders due to the dramatic decrease in driving.

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COVID-19 has been a key catalyst for insurers to shift to digital. On-site accident investigations, independent medical exams, home inspections and in-person interviews became difficult. The insurance providers scrambled to retain business and expand market share through virtual communications. According to Chief Executive Officer of Allianz Malaysia Berhad, Zakri Khir, since the onset of COVID-19, the market has presented all kinds of risks to insurers who had to innovate to adjust to economic disruptions and rapidly shift to digital processes. A KPMG survey among insurance CEOs found that 85% of the CEOs attributed the quick digitization of operations to the pandemic.

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The insurance industry also contributed to society during this pandemic. Some insurance companies have gone one step further and are offering additional complimentary coverage specific to COVID-19. For instance, at the initial outbreak of the COVID-19 pandemic, Prudential Malaysia offers a special COVID-19 coverage at no extra cost to all in-force individual policies. The special benefit is an RM5,000 payout upon diagnosis of COVID-19.

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For the industry, COVID’s impact has not been limited to the exposures that typically arise from a disaster. It has made an impact on the industry in ways that will most likely change the way insurers do business for the foreseeable future. The industry appears to be well-positioned to deal with the impacts of the pandemic and play an active role in developing solutions for future global disasters.