Page 19 - The Insurance Times June 2020

important aspect of these two policy/Covers is that Insurance policies claims are admissible as also concerned
they are not independent standalone policies. While LOP Authorities have confirm the position by press releases
is to be taken in conjunction with a 'Material Damage addressed to the insuring public. However, regarding LOP
policy (Fire or Machinery Breakdown Policies), the IAR and IAR, as on date it is not an insured peril. Even if the
policy has two sections. Section I is Material Damage meaning of 'All Risks Perils" is stretched to include Pandemic
Section, whereas Section II is Business Interruption as an insured peril, non-compliance of other important
Section. The concept on which both the policies operate condition of 'Admissible claim for Damage under Material
is that there has to have admissible claim for "Physical Damage Policy/Section as also excluded cause of 'Cessation
Loss, Damage or Destruction (Damage)" to the insured of Work' will prevent claimant from establishing claim under
property under Material Damage Policy/Section I, Business Interruption Policy/Section.
which will trigger claim for Business Interruption loss
under LOP or Section II of IAR Policies. In the current situation Reinsurers and Insurers have
excluded any kind of loss for Communicable diseases by
An impression has been created that Since Material Damage express warranties but over a period consideration of
Section (Section I) of IAR policy operates on 'ALL RISKS' basis such peril may become reality for policies like Interruption
and since Pandemic is not an excluded peril, it automatically cover for business & supply chains, surety & credit Insurance,
covers Pandemic as an Insured peril. This interpretation may Contingency cover for Event cancellations, travel related
or may not be correct but to say that this automatically insurance, health policies, workers compensation insurance,
covers loss due to lockdown related business interruption. employers' liability insurance, Life and retirement savings
This position is totally wrong. For any claim to generate insurance etc. Insurers and Reinsurers have shown
under Section II, precondition is that there must be an their capability to accept many challenging situations and
admissible claim due to "Physical Loss, Damage or they will surely come forward to meet this kind of challenges
Destruction" to the insured property under Section I of the also. They will be well prepared with current experience and
Policy. Moreover, the Exclusion Causes under the policy inter data.
alia includes "Cessation of work, delay or loss of market or
any other consequential or indirect loss of any kind or To overcome constrain of concept of 'Admissible claim for
description whatsoever". physical Damage under Material Damage Policy/Section of
LOP and IAR policies, cover for Pandemic induced Business
'COVID19" is definitely an insured or insurable peril, which Interruption can be provided by modification of policy
is established by the fact that under Health and Life wordings and/or by a special proviso. T

Life insurers look to hedge against policy surrenders
Life insurers are keeping a close watch on surrenders and persistency numbers, as individuals may not be in a situation
to pay premiums or continue their policies because of financial uncertainties. As a remedy, life insurers are looking to
provide short-term credit - known as bridge loans - to policyholders.
Such loans come at a cheaper rate than personal loans, and can be repaid whenever the policyholder wants. Typically,
these loans are available against traditional policies, which generally attract high surrender charges.
There is a likelihood of customers wanting to dip into some of their past investments and encash them, given the
current liquidity crunch and overall economic scenario, with the possibility of job losses, said Manu Lavanya, director
and chief operations officer of Max Life Insurance.
"We are closely monitoring our persistency and surrenders at the company and product levels - especially for unit-
linked products. The facility of loans against policy may enable customers to manage the situation better. We have
reached out to the regulator and are in discussions over allowing loans against ULIPS," said Vibha Padalkar, MD and
CEO of HDFC Life, in an interview to Business Standard.
"The loan facility is already available with traditional policies. This, we believe, will enable customers to make payments
and continue with their policies, instead of having to surrender them," she added.
"When our branches open up for business, we are likely to receive higher (though not exponential) volumes (loan requests)
but are equipped to both engage and retain while refunding, where the customer isn't keen to continue," said Lavanya.

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