1) Global Financial Impacts

 

Insurers are considering the impact of COVID-10 on their short and long-term financial outlook.

• Increase in Claims: Insurance companies are going to experience an increase in claims. In fact, numerous claims are already occurring in some specialized branches, such as health, travel or loss of profits, and could continue in other areas such as cyber attacks or credit insurance.
• Economic slowdown: The more general concern is how the outbreak could affect the economic environment, specifically the growth prospects and profitability of insurers' underwriting and investment portfolios.
• Investments: The fall suffered by all the world's stock markets has had a great impact on the valuation of portfolios. Although it is true that debt constitutes a very significant part of their assets, mainly in life companies, the collapse of equities will have a very significant impact on the sector. In the following graph, the Insurance Industry is seen as one of the most affected sectors in its market capitalization.

                                                             Impact on Market Capitalization by Sector as of March 25, 2020

2) Impacts by type of coverage and risk

Some negative impacts are related to the coverage of contingencies to which companies operating mainly in the health and life branches may be obliged. However, there are other examples of greater losses in coverage related to: cancellation of events, travel insurance, insurance that covers the interruption/delay of basic supplies for certain industries, health insurance or credit insurance or in reinsurance.

It is also highly probable that, as a result of the interruption of normal activity, in the short term there will be a reduction in claims in other areas where insurance has a significant weight, for example, car insurance and insurance related to mobility.

The individual impact in each case will depend on the products marketed, the coverage offered and, ultimately, any exclusions in the drafting of policies for losses attributable to the effects of epidemics or pandemics. 

• Health insurance: policyholders are concerned about whether or not health care will be covered by insurance in the event of symptoms of possible infection, as well as coverage for treatment.
• Travel insurance: another concern expressed by policyholders is whether travel cancellation due to coronavirus will be possible and what happens to reimbursements.
• Civil liability insurance: both companies and managers are concerned about the responsibilities they may assume if measures to prevent the disease have not been taken or if any action or inaction considered contrary to the duty of due diligence of the administrators has been carried out.
• Credit insurance: companies analyse the possible non-payment of their suppliers and the coverage provided by their credit insurance.
• Personal insurance: Insured parties consider whether compensation should be paid in the event of death or temporary or permanent disability or major disablement due to the coronavirus.
  Payment protection insurance: with regard to payment protection, policyholders consider the impact of temporary work incapacity, unemployment and possible non-payment of loan instalments not linked to mortgage products.
  Insurance in cyber security: companies expect to suffer cyber attacks, taking into account that the networks used for "teleworking" are domestic and not professional.

3) Digital Operation

The Covid-19 can also interrupt the customer service of an insurance company, starting with its distributors. Agents, brokers and financial advisors are likely to face many of the same logistical and risk management challenges as their insurers, especially since many may also have to work from home.

Operating through digital media is of great importance in these times of confinement, both in the Issuance and Claims processes.  To ensure the continuity of the operation, the different actors in the chain need to have processes and platforms for remote transactions: final insured, agents and collaborators of the insurer.

This period should serve as a catalyst for insurers to redefine their strategic and transformation priorities.

There is no single recipe for digital transformation, but different consulting firms have designed methodologies to accompany their clients in the process.

Download our Digital Transformation Methodology

3) Opportunities in Product Design

A redefinition of the products is foreseen in order to guarantee future crises. In particular, to include optional coverage to cover situations similar to those of COVID-19. This will entail the need for changes in the adaptations made to the regulations on the distribution of private insurance and reinsurance.

"Coru joins the effort to support the well-being of more Mexicans by offering an affordable insurance option that provides coverage in case of a diagnosis of coronavirus with a sum to cover treatment and another in case a death unfortunately occurs. It is valid for adults and minors, and can be purchased 100% online.

This type of insurance is ideal for freelancers, independent workers, housewives, students and in general all people who do not have social security or major medical expenses insurance that can be used in case of a positive diagnosis of coronavirus in Mexico; although it can also help complement other insurance and cover additional expenses of the disease.

From now on and through the financial services platform Coru.com you can contract CovidProtect, a personal non-transferable insurance created by Seguros Argos and INTERprotección, which covers medical expenses for the illness caused by the COVID-19.

4) Organizational Impacts

However, the most immediate concern of insurers is protecting the health and safety of employees and their partners in the agent/broker community while striving to maintain business continuity.  

Insurers are establishing multidisciplinary emergency decision-making teams to coordinate the organization's response, establish new safety protocols and ensure faster action as conditions continue to evolve. They are implementing a comprehensive communications system to keep employees, agents and customers fully informed about the status of business continuity plans and instructions on how to stay personally safe.

One of the biggest challenges has undoubtedly been the move to remote operation to protect staff and adapt to possible restrictions on access to the office, all while ensuring business continuity.
Under the above context, insurers are establishing new protocols for claims handling, implementing office or remote settlement processes where possible, even those that normally require on-site visits. 

5) Regulatory Changes (México)

In the face of the Covid-19 coronavirus contingency, the National Insurance and Bonding Commission (CNSF) agreed with the Mexican Association of Insurance Institutions (AMIS) to implement temporary regulatory facilities for insurance institutions in order to preserve the attention of policyholders and contribute to the stability of the Mexican financial system.

In a statement, it was indicated that to ensure the attention of policyholders and the important source of employment that constitutes the insurance sector, as well as to strengthen the continuity of services provided to the population, has determined to temporarily carry out the following actions:

• Extend the deadlines for information requests to insurance institutions so that they can concentrate their efforts on attending to their policyholders.
• Facilitate the delivery of regulatory reports that they are obliged to present.
  Extend the deadline for the endorsement of identity cards so that insurance agents can concentrate their efforts on serving the public.
• Grant regulatory facilities so that insurance institutions that did not contemplate in their policies or excluded risks derived from Covid-19 may establish them in their products
• To provide regulatory facilities so that insurance institutions that so require can extend the deadlines for the payment of premiums by loyal and vulnerable policyholders, without penalty or policy cancellation, for the benefit of the latter.
  Maintain the application of exams for the certification of new agents in coordination with the Intermediary Evaluation Center.