The unprecedented economic and psychological shocks of the coronavirus pandemic and social-distancing measures put in place are expected to cause a largely short-term impact on the financial services sector including insurance.
However, Moody’s Investor Service expects that there will be far-reaching longer-term effects that will fundamentally reshape many aspects of the macro economy, business life and consumer behaviour.
In response to societal and competitive pressures brought about by the pandemic, some insurers are refunding profit from expected lower loss rates back to their clients and extending pandemic risk coverage beyond their contractual liability.
These insurers have been under strong pressure from certain governments and societies to pay coronavirus-related claims that are currently not covered by existing language such as business interruption insurance.
They have also been asked to accept delays in premium payments without cancelling coverage and to provide other means of financial relief to their customers.
For this pandemic, Moody’s Investors Service expects the insurance industry to continue to protect itself against its obligation to pay by means of exclusions and policy wordings, but also to consider the longer-term implications of such actions.
There is also a possibility that ex-gratia payments may become an option in some cases to preserve customers’ perception of the relevance of insurance and to avoid harsher societal or regulatory-led business repercussions.
Further ahead, it is anticipated that governments will seek to partner with insurers to set up insurance schemes that will cover losses in future pandemics. In fact, governments around the world have already partly or entirely transferred health, retirement or natural disasters coverage to the insurance industry.