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23 March 2020
The worsening coronavirus outbreak in Australia will impact the insurance industry, actuarial firm Finity has warned.
Various classes such as travel insurance, personal accident and workers’ compensation will be affected directly and indirectly as the fallout from the deadly COVID-19 respiratory illness continues to rattle the economy.
Exclusions for pandemics and epidemics will be important in deciding “whether and how policies will respond”, Finity Principal Estelle Pearson says in an article posted on the Actuaries Institute website.
“Consideration may also need to be given to whether exclusions meet ‘community standards’ if they will result in large numbers of declined claims, especially if the wording is at all vague,” Ms Pearson says.
For workers’ compensation, direct impacts could come in the form of liability claims arising from a perceived breach of duty of care in relation to visitors, contractors or those under care, especially in the healthcare, aged care and disability sectors.
Indirect impacts relate to changes in claims costs arising from changed business conditions caused by the coronavirus outbreak. An example would be the disruptions to supply chains, which are already happening globally as factories shut down indefinitely.
Ms Pearson says there will also be economic impacts where claims costs affect a number of lines. The lines most likely to be impacted are directors’ and officers’ and professional indemnity, with claims likely to increase from business and investment scheme failures.
Mortgage insurance is also expected to be affected if the pandemic leads to a prolonged economic slump, forcing businesses to lay off workers.
“It is impossible to estimate the impact of COVID-19 on insurance claims costs with any level of certainty,” Ms Pearson says. “The response in Australia and globally continues to evolve.
“Overall, the general insurance industry will not be one of the most heavily impacted sectors. However, the impacts are not necessarily immaterial and careful thought is required to enable insurers to get a handle on the potential implications.”
On travel insurance, Ms Pearson says there will be "a significant impact in the immediate future" on travel insurance premium volumes as a result of COVID-19.