The impact of Covid is one of the biggest risks to various industries. Businesses are struggling with the frenzy of the Winter/ Christmas sale season as they are scaling or renewing their entire operations because of the Covid pandemic.
Most businesses do not have insurance for the pandemic. Right now, they are racing to buy protection against the next outbreak.
Covid insurance big changes: time for a professional review for renewals 2022
Covid has disrupted many industries; the insurance industry has not been spared. With so many claims for health costs, pandemics, exclusions and Force Majeure clauses have been applied. Time to review.
Introduction: various claims from huge to minor have led to various denials under various insurance concepts
In this article, we are describing the various situations where businesses have been hit.
The various claims situations – the main but not all. And what insurance clauses and concepts have been put forward to accept or deny claims. Insurers are known to deny claims ‘at will’ or unfairly: this is a myth. Denial of claims is all about being adequately insured and protected by the insurance laws of the country you purchased the insurance from. Being professionally advised helps in this intricate, opaque aspect due to overlooked very rare occurrences.
Health, life and travel insurance: the biggest hit by Covid
Here are the raw figures from Feb-2020, after 21-months of the spread of Covid by Brazil Times:
Many countries have imposed, to travelers and expatriates entering Vietnam (or other countries), Covid mandatory health insurance coverage, to pay for any treatment costs arising from Covid treatment.
The travel industry and insurance stopped
With every single trip being disrupted in 2020 due to Covid related reasons, some insurers have stopped distributing travel insurance at all. Some have decided to continue selling travel insurance but excluding any Covid related claim. For sure, this new exclusion deserves serious consideration, especially if your host country specifies your travel cover should include Covid treatments.
Life insurance, professional and business insurance in distress
Similarly, when the risk is systemic and implies so many potential claims, some insurers may have fine prints or unilaterally declared/ informed that the Covid related claims are not eligible for reimbursement.
For instance, due to the closure of the ports or the country, one can declare being a victim of an ‘accident’ whereby you stop business or can not perform the value of a contract or lose x months of turn-over. This situation, for instance 30,000 hotels insured losing $30,000/ month revenue for 3-months, amounts to $2,700,000,000 in claims. Now this to the factories in Vietnam during Sep-Oct closures by government decision. The Vietnam non-life insurance industry would go bankrupt.
Depending on the country and level of regulation, the insurers or their regulatory body -the Ministry of Finance- will declare that “this benefit related to Covid can not be claimed with immediate effect” by 3 means:
- Already included in the General Exclusions under ‘pandemics’
- An information letter/ email by your insurer informing you that this benefit of the contract does not apply if the reason invoked for the claim is Covid
- The Vietnam government provides information by press or TV, with a relevant decree, declaring ‘Force Majeure’ the insurer. Read more on Vietnam declares Covid à Force Majeure
Medical insurance can not deny the claim for Covid by Force Majeure
You may have heard about the above Force Majeure, or ‘Act-of-God’ or pandemics when it comes to a Covid claim. You may also have understood wrongly that health insurance does not cover pandemics. Of course, this is wrong or abusive by lowly regulated or rogue insurers in unregulated countries, like Vietnam. Another French vocable, which explains why Covid related treatment claims are eligible, is la “raison d’être” (ie. the essential purpose of purchasing the cover) of your health insurance contract; any medical coverage contract stipulates the insurer will pay the cost of any illness you catch during the period of cover.
Professional and Business interruptions insurance: collateral damage
When the government decided to lock down the country, some hotels and restaurants turned to their insurer to claim for Business interruption refund.
Business interruption by suppliers
Most professional and factory insurance is purchased for property and 3rd party liability insurance. The insurer will pay for the losses and replacement of property or physical injury to you/ your staff or any client/ visitor you deal with in any business transaction.
Business interruption insurance that pays to replace income or profit in case of ‘external factors’ disrupting your activity is rarely purchased. Or perhaps Force Majeure was applicable? Time for a review.
Shutdown due to government lockdown: the consequences for you?
In some countries, when the government makes the decision to stop a business or a sector, there is an allowance or compensation for the unilateral decision. Based on what your clients imposed on you, the government compensated or not, there is precedence to write the defining terms you may want insurance protection for. A professional review to write your own terms, conditions and amounts to submit to the insurers ‘underwriting’ team is always possible.
Professional liability: failure to deliver and breach of contract
Disruptions and liability came in various unsuspected forms and shapes: illness, death, from local suppliers, local workforce, government bans, imports shutdowns, clients demands for indemnity or on-time delivery, legal or financial penalties…
Some of those claims are perfectly legitimate, some are completely abusive. Some are insurable, some are not. Some are a risk, some are a certainty. Only a professional insurer can tell what are your liabilities -for which you can get protection or not- but also who can accept this risk for you and at what cost?
Force Majeure, pandemics, ‘Act-of-God’ clauses, when re-insurance is not enough: do you as a “small client” have a chance to get money back?
All major catastrophic events -like Covid- were an opportunity for insurers anywhere in the world to do their job or shy away from it. With a flurry of needs for protection, some will launch products to cover their clients, some will pass on the opportunity to sign more ‘risky’ business… shying away from their ‘raison d’etre’ ie. embrace risk for their clients by designing protective products.
As mentioned in the first section, in the face of immediate bankruptcy, insurers in developed and regulated countries have defined the perimeter of protection; the important Master word here is regulated!
NB. A regulated country is where some insurance laws exist where a professional Independent Authority exists to protect the insurer or the client and can make a legal decision that is binding to penalize one or the other for wrongdoing. This could go to the extent of revoking the insurer’s business license.
To make it short: Vietnam is not regulated to protect the insured clients; an insurer is a normal business it needs to make a profit like any other ie. They can take the business decisions accordingly.
There is the Force Majeure clause, when the sums to refund can bankrupt a whole sector, the government steps in to declare the ‘super catastrophe’. It defines who, how and how much they indemnify -usually very little as so many people or companies are distressed-, thus alleviating a bit the pain of a very improbable event that life throws at us sometimes.
Covid insurance: Very high costs but insurable risk
This is where professional insurers make the difference; Covid presents a risk/ reward money equation or risk/ opportunity product innovation. As an insurer, you need to play the game or you walk out. Walk out 3 times and you walk out of the business, you are not playing in the category of the insurers.
With data you assess the risk, the price for that risk and the capital -yours or the help of a re-Assureur- and launch the product, you play the game. You may need to play 3 or 5 years in a row making a loss that you adjust. By playing the game, you are and remain an insurer, an innovative insurer and perhaps you have the monopoly of this product in knowledge and distribution worldwide.
Quote image from: Credent Global
Unfunded liability by rogue insurers: “It is when the tide recedes that one can see who has been bathing naked” – Warren Buffett
In lowly or unregulated developing countries, rogue insurers will decide to take on the reward/ the insurance premium and minimize the risks/ forgetting the risk, it will not happen again/ or/ to our portfolio of clients.
Not sufficient funding with collateral capital, and in case ‘S–T happens’, the ultimate answer is a plain denial with all kinds of excuses inserted or not in the fine print. With hindsight, decades-old insurers have a business pattern forging their reputation, long-term insurance brokers know who bathes naked.
During the year-end period approaching, preparation for security is essential. If your business is looking for support with insurance, explore some of Insurance In Asia’s products by clicking on this link.