The Local Insurance Industry Response to the COVID-19 Crisis
By Ramal G. Jasinghe (Chairman -Strategic Insurance Brokers)
We are all in the throes of a serious wave of the COVID-19 crisis, which has brought many a change in lifestyles, individual habits, household incomes, employment, work culture, business, the Economy and the untimely loss of loved ones. The New Normal that has pervaded almost every area of our lives has brought about a total and radical change in “life as we know it”. This situation has challenged society to adapt, introduce and experiment with solutions affecting all walks of life to meet the demands, cater to the needs and to live within a Covid and a Post Covid era.
Health insurance has been the primary instrument of protection at times of sickness and disease but has never before been tested under unprecedented pandemic conditions, where traditional and unforeseen situations impact on underwriting standards and Actuarial Modelling and is now being challenged, daily to accommodate the emerging health and morbidity landscape brought about by the prevailing Covid Pandemic.
The Sri Lankan Life and Non-Life Insurance markets opened up to accommodate and extend insurance cover to their respective Health and Hospitalisation insurance policies. This initiative was carried out by the local Insurance Industry at the turn of the Covid Pandemic which struck our shores last year. The Global Re-insurance Markets too responded to these changing conditions as it is a worldwide phenomenon. Today most insurance companies accommodate and extend Covid related Hospitalisation and treatment.
The introduction and rapid development of vaccines and the carefully rolled out programme of vaccination and quarantine isolation as well as the precautions such as social distancing and sanitisation has managed the spread of the Covid pandemic and success has been recorded in some countries in containing the spread and mutations of the virus. The role of society and Government in controlling the spread of the virus is vital and has a direct bearing to the insurance industry in underwriting and modeling the risk. Global and local trends of the spread of the disease is carefully studied, monitored and followed to bring about favourable conditions to provide useful and adequate insurance cover and protection to policyholders.
Following are some pressing concerns challenging the future direction of insurance in the face of the current Covid pandemic and adapting to the emerging New Normal: .
How should Healthcare insurance be restructured to meet new situations that have entered from Covid?
The COVID-19 pandemic has proved to be challenging in various aspects and the problems arising from the crisis are multifaceted. Society has reacted to the pandemic by being more cautions and concerned to protect themselves and their loved ones from the virus, and are seeking vaccination and protective precautions. Health insurance has responded to the crisis, as well as the State healthcare system which is free of charge has taken the responsibility of vaccinating and giving care to those infected with the virus.
However, the Health Insurance industry needs to respond to the emerging changes and keep pace and abreast of developments in vaccine production, and with the resulting Herd Immunization, to provide affordable insurance policies that will adequately cover the insuring public who may get exposed to Covid related disease.
Restructuring of Health insurance products would involve newer innovations of distribution and easy as well as affordable access to these insurance offerings to a larger population. Group and Affinity Group insurance policies have proved to be an effective and viable distribution channel, as well as the introduction of Bancassurance - distribution of such products through banks, will provide for a wider populace to be covered against their health expenses, particularly at a time of pandemic.
To do this the State and Government factors are important, ensuring proper social alignment to arrest and slow down the spread of the virus as well as to carefully manage the roll out of vaccinations and vaccination programmes and distribution. This measure would certainly help the Insurance industry and provide the correct risk appetite for reinsurers to develop user friendly improved and affordable insurance products to a larger population, making treatment and protection more widespread and accessible.
The call for health insurance has enhanced considerably. People are now getting concerned about the repercussion of the pandemic on their health and wallets and well-being of their loved ones.
When the Pandemic emerged, the insurance coverage against COVID-19 was debatable and was challenged. The world didn’t know what needs had to be addressed and how. Because tweaking existing covers and conditions has a huge impact to the reinsurance treaties of respective insurance companies.
On the same lines people are aware that a one-time hospital admission due to Corona virus can derail their health and finances.
Today we have many policies available in the market. You will find many Sachet policies or bundled insurance products covering protection against COVID-19 with defined limits. The limits in practice starts as low as Rs 50,000 to Rs 500,000 or more depending on the requirement of the insured..
Our Brokerage firm has concluded many such programmes, and has successfully placed Sachet Group cover specific to COVID-19 for our clients especially those deemed as essential services.
I personally feel developing and driving Affinity based insurance products is the way forward to provide affordable Protection. The Industry needs to focus on developing this area of distribution and with Digitalization it is easy to drive the concept to the mass market.
The participation of Financial Service Institutions/and Banks would be the key movers to penetrate the Rural market for such products. In the long run this could reduce the load on the State Health Sector, which is overwhelmed!
Q. Has your organisation considered the need to take up the current crisis and come up with a Covid Insurance scheme for the country?
Given the backdrop of the emerging situation as outlined in the preceding question, we being a reinsurance broker with our footprints across the globe through Uniba Partners, a Global network of Insurance Brokers, we have assisted and worked closely with Sri Lankan insurance companies in structuring and developing medical covers specific to the Corona virus.
Moving forward, we see a bright future and certainly the “way to go”, where Covid specific insurance products and covers are concerned, to use the strengths of our international Broker network, who are engaged with the foremost re-insurers of the world, to provide the local insurance companies with the required capacity to underwrite these Covid related risks, and develop a slew of Covid protection products to the local insurance market.
Q. How will it be worked out and how affordable will it be for low income earners and their dependents?
The current Covid covers that are available in the market are extremely affordable. It can start as low as Rs 1,000 and it goes on depending on the sum assured.
However, as mentioned earlier, it is the fine structuring and development of the distribution model designed and adopted to reach the low and middle income groups of society. Innovations and variations within an Affinity Group distribution model will ensure the numbers of persons benefitting from insurance – the larger the population insured, the more affordable the premium will be to the individual.
Focus on the Rural and Cultivator markets for example, will succeed through a well-managed Affinity Group similar to a Cooperative distribution model, where insurance premiums could be equitably distributed and such products structured to meet the premium quantum.
Innovations and distribution through Micro Finance channels could also be a viable way to reach the low income groups. Affordability and accessibility to such insurance products and premium collection methods would be certainly complementary to the State Healthcare system/
In conclusion, the success of providing adequate and affordable medical insurance cover to a wider cross section of society, will depend on fine tuning, innovation and the active participation of the actors of the State Healthcare System, the Insurance Industry, the engagement with the grass root level Societies and Stakeholders to build a workable eco system of successful implementation.