Tough times ahead as Asia emerges from the pandemic

Patrick Chan, director and general manager of Nova Risk Services Holdings and board member of Brokerslink, spoke to Liz Booth about the challenges of doing business through the Covid-19 pandemic… In Asia, insurers have recently been extending coverage on existing health insurance policies to cover treatment costs or provide Covid-19-specific death cover, according to one leading broker. Patrick Chan, director and general manager of Nova Risk Services Holdings and board member of Brokerslink, explained: “Some insurers in China have initiated emergency response plans to ensure fast claim settlements for policyholders. Yet, we also see different insurers in the same market imposing different policy conditions or exclusions. “For example, for travel cover, some insurers in Hong Kong excluded any losses related to Covid-19 once it was announced as a ‘pandemic’, yet there are insurers who offer coverage under certain circumstances.” In Singapore, added Mr Chan, individuals with life and health policies may apply to their insurer to defer premium payments for up to six months while maintaining insurance coverage during this period. Corporates, including SMEs, holding general insurance policies that protect their business and property risks may apply to their insurer for instalment payment plans. However, he warned that the situation is not always that clear. “There are grey areas that could lead to claims disputes or even absence of coverage. For example, in Hong Kong, employees’ compensation insurance covers legal liability of the employer towards their employees where they suffer work injuries caused by accidents or prescribed occupational diseases during and arising out of employment,” explained Mr Chan. “Yet, under the current Employees’ Compensation Ordinance, Covid-19 is not classified as an occupational disease. Therefore, there could be an argument that someone, including those who work in clinics and hospitals, with Covid-19 can claim under an employee compensation insurance, but they will need to provide evidence to support the claim that they were infected while working,” he added. There are probably more arguments on business interruption cover in the Western world than in Asia because of the lower experience of such epidemics and pandemics in Europe, believes Mr Chan. “This is more likely because of the outbreak of SARS in Hong Kong, Taiwan and China during 2002 and 2003. Some significant business interruption claims were paid, particularly for insureds in Hong Kong and since then, basically, no insurers in the region offer business interruption cover due to the outbreak of infectious diseases; there was an absolute exclusion imposed,” he explained. “While it would be ideal for the market to sit down and work out a better solution for customers, particularly those with business interruption coverage, it doesn’t seem to be an easy task based on the experience with SARS previously,” continued Mr Chan. “The creation of state-backed mutual insurance solutions for pandemics would be extremely difficult, considering the negative economic outlook and the level of government spend supporting the economy and employment,” explained the broker. Looking ahead, Mr Chan admitted: “Covid-19 is affecting the insurance industry both globally and locally. According to forecasts from Lloyd’s, the pandemic is going to cost the industry $203bn in claims paid and failures in investment portfolios. “We have already seen the market hardening and shrinking capacity, particularly in property lines in Asia. Also, Asia Capital Re going into runoff following its acquisition by Catalina nine months ago has not help the situation either.” Other examples included Argo’s exit from Singapore, CNA Hardy’s departure from Singapore and Shanghai, and Tokio Marine Kiln’s exit from Hong Kong. “The trend of market hardening no doubt will continue for a while,” suggested Mr Chan, adding that now is the time for the broker to really show their worth to customers. “It will be a very tough job for brokers because we are in the middle, with insurers wanting more premium while the buyers tell us they have limited budgets because of poor business performance. As this is a universal market condition, brokers must try to look for more alternatives or new markets, carrying out in-depth analysis of their client’s risk profile and loss experience to find ways to convince underwriters to charge a more reasonable level of premium,” he said. Mr Chan thinks the tough market conditions will mean that risk managers will be choosier about what they decide to cover and what they decide to retain. “All clients are very cost conscious these days and, with limited budget to spend, they will probably buy less cover for risks they perceive to be more remote,” he said. Claims are clearly arising under trade credit policies but the picture with medical claims is less clear cut, said Mr Chan. “With the challenges facing the economy, we foresee more claims under trade credit insurance policies as more and more companies go into bankruptcy. An increase in mental health and stress-related claims post-Covid-19 may not be that significant in Asia, because many insurers here actually exclude claims due to mental illness under their medical insurance policies,” he said. “On the flip side, we have found improving loss ratios for the clinical visits section of cover under medical insurance, as people tried to avoid seeing doctors unless they have serious illness as they wanted to reduce the risk of being infected while in the clinic or hospital,” added Mr Chan. One much-touted solution for helping the market has been increased digitalisation. Mr Chan said: “We do see more digitalisation happening in some markets in Asia. Insurance regulators in some territories like Hong Kong actually encourage companies to apply for online-only insurance company licences and will be given a separate fast-track channel so that they do not have to wait between 12 and 18 months to get a licence. “However, those who are planning to offer more complicated life insurance products, which would require policyholders to contribute money for 20 or 30 years, will not be allowed to sell these online.” Blue Insurance, which is a joint venture between Aviva, Hillhouse Capital and Tencent, was the first digital insurer in Hong Kong when it launched in 2018. Bowtie Life is another virtual insurance company in Hong Kong, backed by Sun Life, offering voluntary health insurance scheme plans. The latest digital general insurer launched in Hong Kong is One Degree, offering brand-new medical insurance for pets.

Tough times ahead as Asia emerges from the pandemic

Want to read this article?

Read Next

Global insurers’ market capitalisation grows as results improve

More than 70% of global workforce exposed to climate change-related health hazards: ILO

MNK Group acquires Costa Rican insurer Oceánica de Seguros

Europe saw record extreme heat stress days last year, finds EU report

New chief underwriting officer for Markel’s Indian operations

Global insurers’ market capitalisation grows as results improve

More than 70% of global workforce exposed to climate change-related health hazards: ILO

MNK Group acquires Costa Rican insurer Oceánica de Seguros

Europe saw record extreme heat stress days last year, finds EU report

New chief underwriting officer for Markel’s Indian operations

Want to read this article?

Read Next

Global insurers’ market capitalisation grows as results improve

More than 70% of global workforce exposed to climate change-related health hazards: ILO

MNK Group acquires Costa Rican insurer Oceánica de Seguros

Europe saw record extreme heat stress days last year, finds EU report

New chief underwriting officer for Markel’s Indian operations

Related Articles