Covid-19 necessitates insurance rethink

DO insurance firms have the novel coronavirus pandemic covered? The answer to that question can be anything, except a definite “yes”.

All things being equal, insurance works to enable both individuals and organisations to mitigate loss and ensure financial stability.

The immense socioeconomic disruptions that have been caused by the Covid-19 pandemic globally, have served to highlight significant gaps in insurance covers.

Granted, the impact of Covid-19 pandemic on societies and economies is unprecedented.

However, insurance firms can take important lessons to develop and/or restructure their polices to meet demands of such a crisis, now that we know it is a possibility.

The United Nations Development Programme (UNDP), in its preliminary assessment of the socioeconomic impact of Covid-19 on Zimbabwe, outlines key areas of significant disruptions.

“For Zimbabwe, whose economy contracted by an estimated 6,5 percent in 2019, continued contraction in the magnitude highlighted above, or more given the fragility of the economy, would be disastrous, affecting, disproportionately, the poor and vulnerable, small and informal businesses, as well as small-scale agricultural producers,” it said.

“Delayed imports of goods could increase shortages of basic consumer and intermediate goods and thus fuel further inflationary pressures in the country — imported inflation.

“These, together with wide currency fluctuations and possible rising debt in the wake of the increased demand for goods and services for effective response to the pandemic, could dampen growth further and discourage the much-needed investments thus leading to an increase in the incidence of poverty.”

These are some areas that insurance firms should be looking at to develop novel and relevant policies.

Both locally and internationally, there are various crisis insurance covers of sorts, but perhaps nothing to deal with the magnitude of a crisis such as Covid-19, or components constituting.

“Certainly there are gaps in cover that have been exposed and the industry should come out of this with some responses that they can offer to clients.

“There are opportunities there,” said Insurance and Pensions Commission (IPEC) commissioner Grace Muradzikwa this week during a virtual African Insurance CEO Summit.

It is a big ask for insurance firms — who are likely to be in survival mode as well (due to increased claims, particularly for life and funeral insurers) — to be thinking about innovation and product development. But Covid-19 has brought about both short-term and long-term disruptions that these companies will need to cater to.

National Insurance Commission, of Nigeria (NAICOM) commissioner for insurance Sunday Thomas has suggested that firms can partner with Governments to ensure capacity to deal with significant crises such as the current one.

“There is a lot to learn from Covid-19. We believe that with the nature of risks, there is a lot that the industry can take advantage of the opportunities open to the market. For instance, the issue of business interruption, products can be re-packaged to deliver more value.

“But beyond that, in respect of pandemics like this there can be greater collaboration between the industry and Government, to the point that if certain risks go above a certain level, there can be some Government intervention at some point.”

It’s a critical point, with Mr Muradzikwa also highlighting that governments are already playing the biggest role in trying to ensure socioeconomic stability in their respective countries.

“Our governments have had to rise up to the challenge and provide the various safety nets, which otherwise would not have been necessary if policyholders had taken the necessary covers,” she said.

This article was first published in our sister paper Business Weekly .—