Page 21 - Insurance Times April 2020

concentration of wealth within a few hands and in a few
rich countries. Globalisation has also brought large scale The world becoming a global village,
migration, ecological destruction, labour exploitation and increased economic interdependence,
international conflicts. The latest in this series of woe are social integration, and greatertravel by
issues relating to privacy and security.
people all over the globe can certainly be
In this era of globalisation, global insurance industry has identified asthe key factor underlying the
moulded itself by learning from and following in the rapid spread of the coronavirus
footsteps of other industries. While the underlying ethos pandemic across the globe.
of insurance industry remain the same, insurance is
adjusting with a lot of changes, realigning strategies and like loss of production following such damage. Insurance is
trying to remain relevant in the ongoing journey. The also an instrument of social policy. By providing significant
industry has adopted the concepts of sharing economy, social benefits, such as compensation for injuries at work
outsourcing, telematics, aggregation, cloud computing, and rebuilding property after catastrophes, insurance
block chain etc., all of which are inspiring, and yet, a bit contributes to the rebuilding of people’s livelihoods, as well
scary! as to the economy as a whole.

Over the years, disasters like floods, landslides, earthquakes, The pandemic which began in one part of the globe, was
and hurricanes have destroyed homes, flattened towns and spread all over the world by human beings, and therefore
claimed countless lives on different continents. An unlike other major disasters it did not remain localised to a
earthquake, flood or wildfires would affect one or a few single geography. The world becoming a global village,
countries but not all the countries of the world at the same increased economic interdependence, social integration,
time. Insurers would have details and statistics of the and greatertravel by people all over the globe can certainly
events and would make use of such statistics and details in be identified asthe key factor underlying the rapid spread
designing and pricing products. In fact, this had been one of the coronavirus pandemic across the globe. To an extent,
of the strengths for reinsurers in spreading their risks. this unique pandemic has shaken some of the basic tenets
of insurance and reinsurance. Insurance is based on the
The Covid-19 coronavirus outbreak has been a unique case doctrine of spreading the risks and not putting all eggs into
in the disaster history. It began in China towards the end one basket. However, with the possibility of all the eggs in
of the year 2019 and became a global pandemic by March all the baskets being spoiled at the same time, the business
2020. Most Governments declared a ‘national emergency’ of insurance can be challenging.
and reacted in dramatic ways such as closing borders,
imposing lockdowns and travel restrictions, shutting schools Is insurance industry globally prepared for such a pandemic
and colleges, and banning mass gatherings. The duration that has a long duration, vast global spread, large number
for which the crisis will continue cannot be known and is of deaths and substantial values at risk?The industry is going
for anybody to guess. But alongside the tragic human toll, to be affected in many ways including payment of
it is already having considerable economic impact, posing unexpected claims, large scale and prolonged litigation,
major challenges to the global supply chain and certain difficulty in ensuring regulatory compliances, depressed
business sectors such as airlines, travel and leisure, investment returns, requirement of enhanced attention to
manufacturing, construction. It is also causing significant employee safety, need for realignment in product terms and
stock market volatility and some precipitous falls. pricing, reinsurance availability and affordability etc. Life
insurance claim payments would, probably be more or less
Unprecedented experience for the insurance simple, however, there could be significant issues with
industry?Insurance is a form of risk management primarily respect to non-life products, especially, for claims for losses
used to hedge against the risk of a contingent, uncertain during lock down period and further consequential losses.
loss and is primarily the transfer of the risk from one entity
to another in exchange for a payment. Insurance is an Pandemics are generally excluded from insurance policy
important element of modern economics. Insurance coverage. Health insurance business could also encounter
provides financial support and reduces uncertainties in challenges because of varying interpretation of coverages.
business and human life. Insurers carry the primary burden Marine cargo losses could trigger, again, mainly due to lock
of direct losses like damage due to fire and indirect losses down, but would be subject to policy interpretation. Such
The Insurance Times, April 2020 21