Insurers seen taking a hit from COVID-19 outbreak
Insurers across Southeast Asia, including the Philippines, are seen taking a hit from potentially higher payouts and slowing consumer spending amid the COVID-19 outbreak, insurance credit rating agency AM Best said.
Separately, local insurer Pru Like UK on Monday said it would offer “additional hospital benefit to its customers who will require hospitalization” due to the new virus—the first-of-its-kind coverage in the country.“All customers of Pru Life UK whose life insurance policy is in force with the Hospital Income Rider, issued on or before Jan. 31, 2020, may claim an additional hospital income benefit of P1,000 daily if they are hospitalized due to the novel coronavirus. The additional hospital benefit may be claimed if the policyholder is admitted into hospital for at least 12 hours, with a cap of 10 days, beginning Feb. 20 to April 20, 2020,” it said in a statement.
In a report titled “Southeast Asian Insurers Face Uncertainty in Wider Economic Fallout from Coronavirus Outbreak,” AM Best said that aside from China, Southeast Asia had been the hardest-hit region by far, due to its geographical proximity, large-scale economic and business ties, as well as extensive migratory patterns with China.AM Best noted that insurance penetration in the Association of Southeast Asian Nations had grown leaps and bounds compared with the time the severe acute respiratory syndrome epidemic spread in 2003 such that “the rates of growth for health and personal accident insurance in the region have been typically high over the last five years as the growing middle class sought protection and access to better health care services.”
As such, AM Best said it expected “potential direct impacts to regional insurers to include claims made on medical, personal accident, mortality, travel and business interruption policies.”
Also, the impact of the economic slowdown, which has already hit the region, could be considered potentially material,” it added.
“While it is dependent on how long the economic slowdown persists, insurance companies may face a decrease in premium revenue, growth challenges as well as negative development around their investment portfolios resulting from pressures in both credit and equity markets,” AM Best said.
Philippine economic and revenue officials have already flagged risks to collections of corporate income taxes and import duties due to slower sales of big companies as well as lower shipments from China, respectively, at the start of the year.On the other hand, AM Best said “the low case count to date, epidemic policy exclusions as well as government undertaking of diagnosis and treatment costs are some of the factors likely to limit the potential loss outcome for the insurance industry.”
In the case of the Philippines and Indonesia, AM Best said these two countries have been “relatively more muted in their response to the virus; while some individuals have been placed in isolation, health authorities have not implemented wide-scale containment measures.” INQ
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