Coronavirus is posing challenges across multiple industries. The virus, which continues to spread around the globe, is putting healthcare systems under pressure and claiming lives. As the number of deceased continues to rise, beneficiaries will look into making life insurance claims.
There is a significant variation in the uptake of life insurance policies at a country level. In the five countries with the most confirmed COVID-19 cases – the US, Spain, Italy, France, and Germany – the proportion of respondents indicating that they had life insurance in place ranged from between 38% (Germany) and 57% (France), according to GlobalData’s 2019 Global Banking and Payments Survey.
In China, where the outbreak first started, life insurance holding stood at 57% in 2019. In many instances, customers buy life insurance products for a specified period of time, such as to provide cover for mortgage payments should the policyholder decease.
As with other insurance lines, there is a sentiment of confusion among worried policyholders who do not always understand the extent of their policies’ cover. In this respect, many question whether their life insurance policy would provide protection should they contract COVID-19 and pass away. This would be the case for most life protection policies, provided the application was accurately completed when the product was purchased. Some insurers, however, introduced pandemic exclusions on new policies following the SARS outbreak in 2003, although this is not customary.
Despite the lockdowns and social distancing measures introduced in numerous countries, there are now nearly 1.5 million confirmed cases worldwide. The majority of these cases have not had an outcome, but the virus has nonetheless claimed more than 80,000 lives so far. As the death toll continues to rise, beneficiaries of life insurance policies will undoubtedly make claims. To mitigate losses, insurers are taking precautionary steps on new policies. Insurers have introduced questions that reflect the known symptoms of COVID-19, including whether the individual is experiencing a high fever or any respiratory conditions, such as shortness of breath or a new, continuous cough. If these symptoms are disclosed, the application is postponed.
As of March 3, 2020, the World Health Organization estimated that COVID-19’s global mortality rate was 3.4%, having revised up the previous estimate of about 2%. While it might be too soon to establish the actual mortality rate, should this be higher it would ultimately leave the insurance industry vulnerable to processing more claims than expected, particularly given how infectious the disease is. This will be exacerbated if the pandemic lasts for a prolonged period of time, which would ultimately further squeeze life insurance margins.
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