Insurers have 'pandemic insurance' in case virus deaths spike
Wednesday, 25 March 2020
Life insurers aren't forecasting a massive spike in claims from the coronavirus, but some have 'pandemic insurance' in place if it happens.
'From a claims point of view, we don't believe it will come across in our claims experience on the types of products we sell,' said Naomi Ballantyne, founder and managing director of Partners Life.
Most people cancelled their life and trauma insurance long before they retired, meaning most policyholders were younger, and had a very high likelihood of surviving a Covid-19 should they be infected.
But if claims did spike, Ballantyne said, Partners Life had 'pandemic insurance' which would help it pay claims, if claims spiked by 20 per cent as a result of a pandemic.
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Pandemic insurance was one of the tools life insurers could use to stick within the Reserve Bank's capital adequacy rules, which required them to be strong enough to cope with big shocks, Ballantyne said.
Joe Turnbull, spokesman for Cigna, which has over 450,000 policyholders, said: 'We do have cover for pandemic situations and we're confident that we can cover claims that will arise from this pandemic.'
Deaths, or serious illness from Covid-19 infections in policyholders would trigger claims under life insurance, or trauma insurance policies, which can pay out if people end up spending more than a specific number of days in intensive care.
But other forms of personal insurance could experience claims spikes should the pandemic run out of control.
These include funeral insurance, which is typically sold to older people.
Similarly, debtors with poor-value credit card and personal loan repayment insurance, which is no longer being sold widely, may find themselves able to claim under their policies' redundancy clauses, though these clauses have typically been restrictive, and did not cover many workers, including the self-employed, or people on fixed term contracts.
Cigna offered both kinds of policy.
'From the information we've seen in the media and from the Government it seems like we're going to see increased cases of redundancies in New Zealand. Given that fact, we expect to see a rise in claims for our policies which cover redundancy. As an insurer that's what we're here for,' Turnbull said.
There was much more uncertainty about funeral claims. Government was doing as much as possible to limit community transmission of Covid-19, said Turnbull, and Cigna was monitoring the situation closely.
Insurers were also encouraging people struggling to pay their premiums during lockdown could ask their insurers for help, with options including taking a premium holiday, or suspending policies.
Partners Life had introduced a Covid-19 trigger that let people take a premium holiday, if their incomes dropped by 20 per cent as a result of the coronavirus outbreak.
Even when on premium holiday, policyholders qualifying under the Covid-19 trigger would keep their cover in place.
'We will put them on a premium holiday for six months with full cover, no premiums, which is literally giving them free cover for six months,' Ballantyne said.
That was not the case for premium holidays at all insurers as terms and conditions varied between policies, said Ballantyne.
Some currently provided no cover when policyholders were on premium holiday, and then, when the premium holiday ended, required them to make 'catch-up' payments to cover the missed payments.
Partners Life would not require catch-up payments for qualifying coronavirus-related premium holidays, and would absorb the cost itself, Ballantyne said.
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