The major goal of every insurance company is to be in a state of readiness to meet its liabilities in respect of the uncertain events insured. However, the events which have taken place in the past few months are clear indications that perhaps a number of insurance companies were not prepared for the uncertainties and adverse effects a pandemic, such as COVID-19, would have on their business operations.
Until a trusted vaccine or cure is found, COVID-19 will be here to stay with us – and it will continue to ravage economies of the world. As it stands now, no business is totally insulated from the adverse effects of COVID-19.
But history has shown us that in the midst of adversities the human spirit rises to the challenge, and people and businesses resort to innovative ways to circumvent or overcome the tests they face. A number of insurance companies in Ghana, GLICO not being an exception, have embraced the challenges the pandemic has brought to bear on their business operations and remodelled their businesses to respond to those challenges.
Just like the biblical ten spies sent by Moses to survey Jericho, most of the spies reported insurmountable challenges but two of the spies saw opportunities that were overriding the challenges the others saw. There are certainly opportunities to be explored in any adversity, and COVID-19 is not an exception.
Let us now turn our attention to some of the negative and positive effects of COVID-19 on the operations of life insurance, non-life insurance and health insurance.
Negative Effects of COVID-19 on the Insurance Industry
Insurance is one of the industries that takes a major hit whenever there is a downturn in the economy. The world economy has seen a downward spiral since the pandemic broke out and as usual the insurance industry in Ghana has been impacted adversely. Here are some of the negative effects the pandemic has had on the industry.
The paramount obligation of insurance companies is to pay claims. However, the strategic goal of every insurance company is to generate more premiums and pay less claims so as to meet operational and other expenses and declare significant profit. A rise in claims is therefore a source of worry for insurance companies. COVID-19 has been described by many experts as a health and economic emergency which has given rise to insurance claims. The impact of COVID-19 on insurance claims depends on the type of insurance products.
Health insurance has seen a rise in claims, and here, I can only speak in respect of our subsidiary, GLICO HEALTHCARE. The increase in healthcare insurance claims is not only as a result of the rising number of COVID-19 patients signed on to healthcare schemes, but also due to anxiety, stress, depression, reduced human mobility, curtailment in regular exercise among others, which have triggered other illnesses giving rise to claims.
Corporate schemes constitute a larger percentage of the business portfolio of healthcare companies. With the rising levels of COVID-19 infections and the recent revelation by the Honourable Minister for Information that workplace COVID-19 infection was on the rise, it is likely the claims liabilities of companies would further increase in the next two quarters of this year.
Undoubtedly, life insurance companies selling mainly savings-linked products have had their claims numbers increasing, especially during the period of the lockdown when policyholders, particularly micro-insurance policyholders, needed funds and had to fall on their savings policies. Majority of workers in the formal sector who have been furloughed or suffered redundancy as a result of the COVID-19 economic challenges, have also surrendered their policies thereby increasing the number of claims.
Funeral policies sold by most life insurance companies in Ghana would certainly also raise the number of claims as the mortality rate of the pandemic increases. We must not lose sight of the fact that funeral policies also cover the aged who are most susceptible to COVID-19 deaths.
COVID-19 related claims for non-life insurance has been relatively minimal. Policies such as travel insurance, business interruption, event cancellation among others tend to have standard exclusions for pandemics such as COVID-19 and related risks. Moreover, during the lockdown and some weeks following the lifting of the lockdown, the rate of motor accidents reduced considerably as a result of fewer vehicles plying the roads. International air travel has also been suspended and therefore there may not be any claims emanating from travel insurance policies.
Reduction in Sales Due to Reduced Business Activities
The economic downturn as a result of the COVID-19 pandemic has had a negative impact on insurance sales in the country. For those who do not have any form of insurance at all, buying an insurance policy may be the least of the things they would consider under the prevailing economic circumstances.
With the disposable income of prospective buyers affected by the current economic situation, the sale of life insurance has become quite difficult. With uncertainties still surrounding the pandemic, a number of people prefer to put the little they have as disposable income into short-term savings, where they can readily make withdrawals to meet contingencies rather than buy long-term life insurance policies. The redundancies and suspension of business operations have also narrowed the market for life insurance, and indeed other types of insurances.
There has been keen interest in health insurance due to the pandemic creating awareness regarding the need for individuals and organisations to have health insurance policies in place against any future health issues. However, the increase in health insurance awareness, unfortunately, has not significantly reflected in sales due to the economic challenges. It is hoped that the sustained awareness-creation will eventually impact on sales when the economy begins to improve.
The non-life sector has also been affected, especially the retail segment. For instance, motor owners who would have insured their vehicles comprehensively are rather resorting to third-party motor insurance to cut down on cost. The suspension of international air travel has also temporarily collapsed the business line for travel insurance.
Cancellation and Suspension of Policies
Whenever the economy takes a nose-dive, as is presently the case, individuals and organisations seek to cut down on cost – and one of the items on their pay-slips or financial statements they take action on is insurance.
Closure and suspension of business operations, especially the hospitability industry and others, have resulted in non-renewal of corporate businesses for most of the insurance sectors. Even where the corporate policyholders renew, they do so on new terms which ensure a significant reduction in the premiums payable due to the COVID-19-induced economic challenges. The same can be said about some individual policyholders who have also cancelled or suspended their policies due to COVID-19.
These cancellations and suspensions of insurance policies at the corporate and retail levels have impacted adversely on the premium incomes of insurance companies.
Increase in Cost of Operation
Whereas premium income continues to dwindle as a result of COVID-19, cost of operation for some insurance companies has also gone up. Finding new ways of serving customers has resulted in an increase of operational expenses – particularly in the areas of phone calls, Internet and data costs, acquisition of more laptops, mobile electronic gadgets, purchase of COVID-19 PPEs and other preventive materials such as hand-sanitizers, handwashing soaps and tissue, among others.
With premium income going south and operational expenses moving north, the profit margins of insurance companies are likely to be impacted negatively by close of the year.
Capital and Reserves
With the regulator having given a deadline for all insurance companies to increase their minimum capital to a certain threshold, a number of insurance companies which are yet to raise their capital to the requisite level and had plans of making significant profits so as to transfer same from income surplus to boost their capital will be disappointed with the decline in profits as a result of the effects from COVID-19.
We can only hope the decline in profits will not affect the companies’ efforts at raising capital to meet the minimum capital requirement in fulfilling regulatory requirements.
The Positive Effects/Response to COVID-19 pandemic
It has not been all gloomy news about the COVID-19 pandemic. The effects of the pandemic have brought about some innovative insurance business operations; notably, providing social distancing services to policyholders. Here are few of the positive responses to effects of the COVID-19 pandemic.
At GLICO, when we say “we cushion our customers for life”, we mean it. One of our initial responses to the pandemic outbreak was to find ways of covering our policyholders and prospective ones from exposure to some of the negative effects of COVID-19.
We therefore provided a Free COVID-19 Hospitalisation Cash Income for all our policyholders. In effect, any GLICO policyholder hospitalised as a result of COVID-19 infection is entitled to a daily free in-patient cash benefit of up to GH¢200.
Moreover, we also put in place all the necessary measures to ensure adherence to all the COVID-19 protocols – including creating sitting areas for customers to comply with social distancing at all our offices and protect our policyholders from infection.
This was our way of showing empathy to our policyholders who may be affected by COVID-19, and letting all policyholders know that we are in this situation together and GLICO cares for them. As a matter of fact, we have been paying some COVID-19 claims – and we do it gleefully for the claimants.
Business Continuity/Digital Service Delivery
All the subsidiary companies of GLICO have their own Business Continuity Plans, but these plans had never been fully activated. COVID-19 afforded us an opportunity to fully activate the Plans and further strengthen them to provide offsite services to our numerous policyholders.
The effective accelerated launch of our digital capabilities – including digital claims payment; virtual call centres; online and mobile self-service portals among others – has boosted our confidence in delivering on our promises whether there is sunshine or rainfall. It has changed our business model and accelerated our quest to lean more on digital service delivery to our policyholders.
GLICO LIFE and GLICO GENERAL staff working from home are able to pay claims digitally to customers in the comfort of their homes and renew businesses effectively. Our well-equipped Call Centre serves as a central point in collating and transmitting policyholders’ requests and having them served, while directing customers to subsequently take advantage of our digital platform services.
The use of our expanded digital platform services has continued beyond the lockdown, and also enabled us to ensure proper social distancing in all our over-thirty offices nationwide.
Significantly, GLICO HEALTHCARE introduced an innovative way of servicing its customers called ‘E-Medicine’. With patients not being able to go to the various health centres for treatment during and after the lockdown, and a number of patients reluctant to frequent the health centres due to the fear of getting infected with COVID-19, the company was able to bring the healthcare ecosystem online and on air, by way of telephone, to enable its customers get service in the comfort of their homes.
Customers can call our hotlines to book appointments with doctors, both General Practitioners and Specialists; have their laboratory tests done at home, if required; and subsequently have prescribed drugs delivered to them – all in the comfort of their homes. The team of doctors and paramedics at the company subsequently make regular calls to check on the patients’ condition.
This unique service innovation has come to stay, ‘thanks’ to COVID-19.
The shift to digital service delivery as a form of response to the COVID-19 pandemic has resulted in increased efficiency and excess manpower that needs to be redeployed for greater efficiency and productivity.
A good number of staff are now being redeployed to the sales department of companies to boost production and to service policyholders. This is definitely a positive side of the COVID-19 pandemic.
Virtual Meetings Improving Productivity
Before outbreak of the pandemic, meetings with policyholders, brokers, partners and others were all held face-to-face. To attend these meetings, one had to spend productive hours driving through heavy vehicular traffic and return to the office – wasting additional hours in traffic or on the road.
COVID-19 has opened the door for use of various technologies to conduct virtual meetings, which are as effective as face-to-face meetings. In the comfort of one’s office or meeting room, meetings can be held virtually with any person/s in any part of the globe in a matter of minutes or a few hours.
The popularity of using technology for virtual meetings and webinars will only increase long after COVID-19 has been suppressed or eliminated. This is because organisations and individuals have come to the realisation that man-hours can be better-used meeting people virtually rather than wasting precious time driving around town for meetings. We should not forget the savings in operational cost by way of reduction in fuel cost.
Other Business Ventures
Some non-life insurance companies have had difficulties completing the cycle of their virtual claims payment, especially motor insurance claims, where due to the social distancing and isolation a number of their partner garages or mechanics could not work on customers’ accidentally damaged vehicles on time.
As part of the innovation brought on by COVID-19, these companies can consider diversifying into establishing subsidiary vehicle-repair companies to attend their policyholders’ vehicles. By so doing, they will retain control of repairs on customers’ vehicles and maintain a high level of service delivery come rain or shine.
Helping One Another for Common Humanity
The COVID-19 pandemic has brought the humanity in us to the fore. Since the pandemic hit the shores of Ghana, most Ghanaians and entities have shown that we are each other’s keepers.
Admirably, the insurance industry has played its role in supporting government’s efforts at containing spread of the virus. The Ghana Insurers Association (GIA) as well as individual insurance companies have made donations to government, our gallant frontline workers and other individuals. At GLICO, we have and will continue to contribute in the fight against COVID-19 by providing essential items to key stakeholders, particularly the vulnerable, and support for virtual education.
Crises like COVID-19 in Ghana have put insurance companies, regulators and governments into a challenging situation, particularly in navigating the economic and financial impact on businesses and consumers. As we make our way through unchartered waters in this pandemic era toward a new normal, we can only focus and take advantage of the opportunities it brings.
These turbulent times may very well be the turning point that will drive transformational change across the insurance industry. Those who are able to respond, at pace, to this changing environment, who take a customer-first attitude, and who see this as an opportunity to reset and fundamentally rethink how they do business, will find themselves emerging from a position of strength when the dust settles.
A paper presented by Mr. E. Forkuo Kyei, Group CEO of GLICO Group at the Integrity Magazine Webinar held on 30TH June, 2020