The coronavirus pandemic has been something of a boon for one part of the market, as organisations turn to financial advisers, brokers and consultants for help in overcoming the challenges posed by the outbreak and the resulting business disruptions.
Although investors are keeping away from the volatile financial markets, organisations are increasingly seeking professional counsel for innovative protection instruments to mitigate losses.
Insurance broker and risk adviser Marsh has advised organisations to work closely with their brokers, counsel and other advisers to overcome potential challenges as the pandemic has led many companies to search for property and other insurance policies as a protection measure.
“In light of the covid-19 events, we strongly urge all businesses to communicate with their insurance consultant to gain an understanding of how their policies will respond to any ongoing financial loss,” Christos Adamantiadis, chief executive of Marsh Middle East & Africa, said in a statement.
Reach out to them
As the virus continues to rapidly spread across the Gulf region, some countries have shut down or enforced heavy restrictions on many public activities, causing a decline in economic activity.
Many property insurance policies include coverage for business interruption losses.
However, during this time insurers are more likely to view those coverages as being triggered only by insured physical loss or damage.
It is expected that many insurers will deny cover where the virus is suspected to be present, even if physical loss or damage takes place.
“Reaching out to insurance and risk experts for guidance and advice is crucial to protect your business and build resilience against the uncertain economic backdrop of covid-19,” Adamantiadis said.
“We recommend all businesses evaluate their policies thoroughly, including any extensions, with their brokers and claims consultants to better understand their terms and conditions.”
Broaden clientele base
As for the adviser market, the pandemic is offering opportunity to broaden clientele base.
“Although the covid-19 outbreak is causing widespread concern and increasing economic hardship for consumers, businesses, and communities; it will create a huge opportunity for the industry (advisers) as with every problem there’s a solution and an opportunity to learn, create something that’s meaningful and might give us more options to build our business robustly,” said Aftab Hasan, chief executive of Arya Insurance Brokerage Co, chairman of Risk Exchange (DIFC), and secretary-general of Insurance Business Group.
“As practitioners of insurance and as brokers, advisers or consultants to policyholders; it is an opportunity to demonstrate our value at a time when organisations are distressed and looking for a piece of professional advice to survive in these turbulent times,” Hasan added.
Little impact on industry
As for the insurance industry in general, analysts are of the view that there has been no immediate impact on the industry except the fact that the number of insurance claims have significantly dropped, for motor as well as health.
For mandatory lines of insurance, such as motor and health, it is business as usual.
For the commercial lines, such as property and indemnity, the confusion around force majeure and termination of contracts owing to covid-19, has led to a higher demand for business interruption and other indemnity policies, said Anand Singh, senior associate in the insurance and reinsurance practice at law firm BSA Ahmad Bin Hezeem & Associates, Dubai.
Health claims rise
However, industry analysts feel that in the medium to long term, this may change.
Insurance companies are seeing a huge number of claims on the health insurance, from medical treatment for covid-19 patients, as well as planned surgeries once the lockdown is lifted.
Also, there are a number of claims arising out of the business interruption policies and advance loss of profit covers.
On the motor insurance side, the UAE Insurance Authority has instructed the providers to arrange for pro-rata refunds of premia to customers who did not use their vehicles because of the lockdown, along with discount for certain categories of vehicle owners, which would lead to reduction in overall premium earned by the insurer.
Singh also said the reinsurance rates are likely to harden up in the medium to long term and this would also impact the profitability of the local insurance companies.
According to report from ratings agency S&P: “Many insurers are likely to see a slowdown in sales because government-imposed lockdowns and social distancing measures have restricted face-to-face interaction.
“The costs from covid-19 related claims for the region’s insurers are expected to be limited as most governments in the region are directly covering these with the exception of a few.”
