Gideon Sarfo’s thoughts ….The insurance market in the face of COVID-19


The COVID-19 pandemic has severely impacted many industries such as Travel & Transportation, Energy, Manufacturing, Retail and Hospitality. Although the impact on the Insurance sector is less severe, it is believed that it will still be significant and highly disruptive ranging from employee and business continuity issues, client service considerations to operating profit.

According to John Neal, CEO of Lloyd’s of London, coronavirus is the biggest challenge ever faced by the insurance industry. The estimated costs of COVID-19 could reach hundreds of billions of dollars. They are believed to far exceed those of Hurricane Katrina (2005) and the 9/11 which are the two most significant events of the past twenty years. On the other hand, insurers are expected to compensate a portion of the premiums to their customers whose businesses were impacted by the pandemic

The most obvious theme has been the suddenness of the impact of the virus and the substantial effect on how insurers, along with businesses of all kinds, run their operations. Insurance companies have had to shift almost their entire workforces to operating remotely.

The Organization for Economic Cooperation and Development (OECD), in its report “Coronavirus: The world economy at risk,” said that a longer-lasting and more intensive outbreak could reduce global growth to just 1.5 percent in 2020. Insurers across the world would likely be impacted by a sharp slowdown in economic activity which would undermine growth and perhaps even contract insurable exposures.

The Insurance Information Institute, in its first quarter “Global macro outlook,” reported that “COVID-19’s impact on global growth and the insurance industry is likely deeper and wider than the current consensus and could last well into the third quarter and beyond.” The report added that, as a result of the effects of the virus outbreak, “global GDP growth in 2020 could slow down by as much as 1 percent, from 3.3 percent to 2.3 percent, making a 2021 recovery unlikely.”

China and Italy

Encouragingly, insurers have been stepping up to the challenge, supporting businesses and the communities in which they operate. This has been the case in two countries, hit particularly bad by the virus – China and Italy.

In China, some insurers have extended coverage on existing health policies to cover treatment costs or provide Covid19-specific death cover. One of the major life insurers, for example, launched a special pre-compensation programme for existing policies and provided agents 10 million free policies totalling about US$10,000 per policy to be distributed to customers. Other health insurers have initiated ‘Emergency Response Plans’ to ensure fast claim settlement for policyholders. Additional coverage has also been provided to millions of healthcare workers and reporters working in the worst-affected area. There was a similar picture of free extensions to cover in Singapore and Hong Kong, even though the pandemic was much more contained there.

In Italy, healthcare costs are largely covered by the public health system. Some major insurers have already developed policies designed specifically to protect policyholders from the risk of Covid-19 as a standalone product or extensions on existing products. These policies are primarily aimed at businesses and families and are contingent on being diagnosed with coronavirus. For families, they may be provided with a hospitalisation allowance in the event that is required and the provision of additional funds in the case of intensive care. For companies, they may be given an insurance coverage solution that can be offered to all company employees regardless of the existence of health insurance plans.

Ghanaian Outlook

In March 2020, the Ministry of Health announced a special life insurance cover for health and allied professionals at the forefront of the coronavirus pandemic response. A letter signed by the Health Minister, Mr Kwaku Agyemang-Manu and addressed to all heads of agencies within the sector disclosed that the forefront staff involved in the COVID-19 response have been insured under Group Life cover with an assured sum of GHC350,000 per life. Personnel attending to patients with critical illness have been assured a sum of GHC25,000 per life, whiles those treating persons with any form of disability have insurance cover of GHC25,000 per life. The entire premium of the insurance packages total GHC10,309,919.94.

Enterprise Insurance Company Limited amid the pandemic has offered life insurance cover of GHC20 million for 2,000 frontline staff working directory to combat the COVID-19. The insurer has recently extended its motor policies to cover life, hospitalisation cash benefits and 50% waiver of motor claim deductible for existing motor insurance policyholders between April and July 2020.

Prudential Life has introduced a life policy called Prucovered-19 or Covered-19 Protection Plan to new and existing customers by default for a period of forty-five days covering diagnosis and hospitalisation benefits.

In other countries, governments have committed or are considering to cover the wages of workers laid off for a period of two months, but there is ongoing discussion about what insurance payments, if any, might be made to compliment social security support for those who are sick or need to care for relatives. Insurers from a social purpose perspective are also donating monies or other assistance in support of healthcare workers, hospitals or others in need. Insurance companies like many other industries are looking at meaningful ways to contribute to society.

Business Interruption

As a result of these limitations on the availability of coverage for business interruption losses related to COVID-19, and possibly with a view to managing policyholder and stakeholder expectations, a number of insurance associations have issued statements about the probable availability of coverage. In the United Kingdom, the Association of British Insurers released a statement indicating that most companies will not have coverage for business interruption resulting from business closures due to coronavirus as only some larger companies may have acquired a coverage extension for closure due to any infectious disease (ABI, 2020). The Insurance Council of Australia has indicated that coverage for business interruption under commercial property policies is normally only triggered as a result of physical damage. It noted that some policies might provide coverage for business interruption resulting from the closure of a business ordered by an authority, including as a result of an infectious disease outbreak, although the insurance industry began introducing general exclusions for business interruption losses resulting from “quarantinable diseases”.

Remote Working

Ensuring continuity of critical services, insurance companies need to pay attention to their customers. In times such as now, customers are concerned, and a key role of insurers will be to reassure and support them. Customers are anxious over aspects such as policy coverage. Insurers need to make sure that they can provide answers to queries in a clear, concise and efficient manner. Insurers should be pro-active in distributing FAQ’s and other collateral to their customers. They should look closely at their distribution channels and use situation as an opportunity to re-enforce capabilities via broker networks and direct channels using mail, mobile, social media.

This would be an ideal opportunity to consider and plan for increased use of virtual assistants that leverage Intelligent Automation to increase availability and agility in responding to customer inquiries around policy coverage, renewals, premiums and claims. As stated, the COVID-19 pandemic is affecting all aspects of life, it is a dynamic and evolving situation where the future is unpredictable. Insurers need to consider and prepare for increased claims ratio impacting profitability, budgets, cash flows, capital requirements, etc., and the lower returns from traditional investments will continue due to market volatility and low to 0% interest rates.

Insurers should also look at new business opportunities such as products providing pandemic coverage, cash flow coverage, force majeure exposure coverage. The concern about future sales is not only confined to those with large agent networks. It is an issue for non-life insurers generally. Insurers may be facing some delays in policy renewals and postponing some income that they will have been anticipating. More broadly, if the pandemic provokes recessionary conditions in economies around the world, commercial premiums can be expected to drop. Small and medium enterprise businesses, for example, have been a strong growth area for many insurers internationally, but many small businesses will be looking for ways to cut costs or some may not even exist if this pandemic is sustained for a long period. Insurance covers may suffer for a more extended period.

Insurers should review the impact remote working has on the effectiveness of their business to deliver services, to determine whether the adoption of new working practices and collaboration tools can enable this operating model to be the new norm. If the answer is yes, then firms should embrace as it provides opportunity to weather future disruptive events, helps to improve the quality of life of their employees and reduce fixed costs such as offices and related infrastructure.


Insurance companies need to be pro-active. That they should look to model and the impact of COVID-19, and then determine the best strategy to mitigate. However, priority must be given to business continuity. Firms need to determine their critical business functions, prioritise these to ensure that the level of service is maintained or even increased. Other business functions should be reduced or stopped to enable focus on the priority activities. Insurers should take into consideration levers such as customer experience, capital impact, revenue impact, liability exposure, regulations and government directives to help determine which business services need to be prioritized while they overcome the current crisis.


Email: [email protected]/ [email protected]

The writer is the Tri-Star Insurance Services Gh. Ltd.

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