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by Protection Review 29/04/20

Andy Couchman looks at the industry after Covid-19 and opportunities for collaboration.

Go onto YouTube and you’ll find a 2015 Bill Gates talk forewarning about coronaviruses. But a quick trawl through the medical dictionaries reveals we have known about coronaviruses for many years before that – indeed the SARS (severe acute respiratory syndrome) epidemic that started in 2002 was described in the Collins Dictionary of Medicine as ‘a new coronavirus’. 

In fact, you have to go back to 1931 to find the first mention of coronaviruses (in chickens in North Dakota, USA) and it wasn’t until the 1960s that the first human coronaviruses were isolated by researchers in the UK and USA as something that could cause a common cold.

So, you might expect UK life and health insurers to be well ready when Covid-19 came onto the scene outside of China earlier this year. However, it is worth noting both the two biggest human outbreaks - SARS (2002 onwards) and MERS (from 2012) - killed ‘only’ 774 and 858 people worldwide respectively. Contrast that with a summer heatwave in the UK that could kill 3,000 or more any year.

So when Covid-19 began to emerge in China at the end of 2019, the expectation was that it might follow a similar path to earlier coronaviruses – affecting many countries and sadly killing many people. But by ‘many’, the hope was hundreds, not the thousands, tens of thousands or hundreds of thousands we have since seen.

For UK life and health insurers, Covid-19 has had a number of effects and issues they have had and will still have to address including:

• Claims may rise. But that varies by product and on some (e.g. PMI and iPMI), claims would actually fall short-term, as the independent hospital sector geared up to treating Covid-19 and other emergency patients only.
• Many staff would be self-isolating, working from home or ill. Some may even die.
• Advisers and brokers would be hit too.
• Underwriting would be affected as doctors could not medically examine patients, while many GPs were too busy to worry about completing GP reports.
• New sales that depend on face-to-face meetings would stop. Some would be replaced by alternative sales and advice methods.
• Generally though demand for protection could rise.
• But many people will struggle to pay premiums on existing policies.
• Ill people who were not infected may still exhibit worse morbidity and mortality due to the disruption of healthcare systems.
• Most customers would value additional unbiased help and information and may see their insurer as a ‘trusted expert’ on such matters.

The underlying insurance risks may change too:

• Potential customers may have the virus, been exposed to it or be at higher risk of getting it, creating an immediate underwriting issue.
• Those with certain underlying or chronic health conditions would now represent a worse risk going forward.
• As may older people generally.
• Certain covers, such as day one and one-week income protection policies, would turn out to be woefully underpriced.
• The nature of coronaviruses may mean cover against them simply would be unaffordable going forward. That could mean having to add exclusions or discontinue products.

On long term products (life, CI and IP) any changes made would likely only affect new policies – existing ones would be unaffected (except perhaps for increases). If Covid-19 becomes a more or less permanent feature, then long term care insurance may become more attractive to insurers – or perhaps less so to potential customers and their families.
GI (general insurance products) are what are called short-tail risks and annual or monthly renewal means T&Cs can be changed very quickly, as can premium rates.

But, insurer decision-makers were also (or should be) aware that the delicate journey to rebuilding consumer trust could be easily derailed if insurers were seen to be acting unfairly towards their customers or being unsympathetic, unhelpful or ‘hiding behind the small print’. That adds up to some tough decisions having to be made. By the end of April, we had seen announcements from most life and health insurers. The initial focus was understandably mainly on protecting insurers from anti-selection, but in recent weeks we have seen more reasoned responses to helping customers too, especially around premium/cover holidays and virtual medicals. So, who has responded best so far to the crisis? And by ‘best’ we are looking first from a customer’s viewpoint, then from an adviser’s viewpoint and finally from insurers’ owners’ (shareholders and policyholder members for mutuals) viewpoint - in that order.

There is no clear answer yet to that - it depends on how you and your clients are affected but those who ultimately deserve to win out have tended to be fast responding (but not knee jerk), transparent in their thinking and communication, and to have genuinely tried to do the very best for their customers and their supporting advisers and brokers. It’s still an ongoing process too and it will be some months before we know the full fallout resulting from the virus. As someone whose past corporate roles would have seen me at the heart of this decision making, I know I’d have relished the opportunities now being thrown up, whilst also being acutely aware of the massive responsibility you have to get your decisions right – for all your stakeholders. 

But what are your views? Which insurers have done most in your view to help your customers and to help you? 

When I get round to reviewing how the industry responded to the pandemic, I’ll be looking at which insurers were most accessible. Which developed new and better ways to communicate with advisers and with their clients. Who handled claims and admin quickly and fairly, and whether their new rules were draconian or sensible? Which companies helped advisers to grow their business by trying hard to minimise the downsides or who just apparently made life even harder than it need be?

Looking to the future, I’d like to think that we’ll have better products and benefits to offer clients rather than simply higher pricing and harsher underwriting? I’d expect to see an increased demand for protection from clients so who will do most to meet that opportunity? Finally, where are the gaps? Where do you think insurers need to do more or to develop new ideas – perhaps even radical ones – that will be affordable, attractive to buy and that will deliver real value and service to your clients?

In the meantime, one question we’ve been debating within the Protection Review team is whether insurers be left to decide for themselves what changes to make – or should there be minimum standards, as we have for CI and PMI for example?  We have ABI model CI definitions in its guide to minimum standards, should we also have ABI (or some other body?) coronavirus standards? We’re all for effective customer focussed competition, but in these unprecedented times do we need to work together on the best minimum standards?

Please let us know your views. Email us at [email protected]