Cost of Pandemic Threatens Finances and Face

It has been a bitter week for the global insurance sector.

The COVID-19 pandemic continues to claim thousands of lives across the world and governments continue to wrestle with the pressure to reduce the spread and look to ways to salvage an economy which remains in freefall.

Social distancing is having an effect but it is clear that a return to the lives enjoyed pre-pandemic is many months away.

The annual Monte Carlo Rendezvous has been cancelled however, the industry has bigger concerns on its plate, a plate that is growing ever more inedible by the day.

As governments and businesses look at how to revive the economy the insurance industry is in danger of becoming a ready scapegoat for any road bumps on the journey out of recession.

In the UK and the US, businesses and politicians have been publicly criticising the industry’s approach to business interruption claims amid allegations that firms are seeking every angle to deny claims leaving their clients facing ruin.

Efforts by politicians in the US to look to retrospectively add pandemic cover to BI policies are still ongoing despite increasing warnings of the catastrophic impact on insurers should there be even partial success.

In the US we have seen insurers returning a percentage of premium to policyholders for their motor policies given the drastic reduction in car usage due to self-distancing.

At present it has only been replicated in the UK by Admiral, but the reluctance of their peers to take such a step has not gone unnoticed by the media and various commentators.

Fresh from its mega merger with Willis Towers Watson, Aon has announced that 70% of its staff will undergo a 20% salary cut. It is a bitter blow for the staff but is also another blow for the industry and one which has seen staff across the sector fearing that their firms, and with its their pay, will be next.

Swiss Re CEO Christian Mumenthaler has warned the industry that lessons have to be learned and suggested that private-public partnerships maybe the solution.

Clearly the huge costs associated with the claims arising from the pandemic and its impact on business and personal life is such that a comprehensive solution to future pandemics will need state participation.

However, we live in a time of populist politics and once the pandemic is deemed to be under control the political blame game will begin. The industry can expect that its approach to claims paying, the breadth of its cover, and its efforts to support domestic economies will come under the spotlight.

The debate will likely be held whilst accompanied with a range of class actions and legal challenges from firms who believe their policies should have reacted to their claims.

The mantra “they are quick enough to take your money but it is a different matter when it comes to paying a claim,” has beset the industry for decades. The fear has to be that the performance of the industry during the biggest global crisis in living memory has done nothing to dispel that mantra.

Instead the industry is there to be shot at and we can rest assured that there are many who are already reaching for the ammunition.

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