More than twenty-one months have elapsed since the WHO was informed of cases of pneumonia from unknown causes. A novel coronavirus was identified, and life as we had known it was thrust into a trajectory that no one could have predicted. The impacts have been devastating – with more than 4.5m deaths worldwide over this time. Globally, more than 6.7% of global GDP was lost in 2020 because of the pandemic.
The COVID-19 crisis affected all business sectors and insurers were inundated with claims across multiple lines whether that be for health, life or non-life cover. These financial impacts had repercussions on capital maintenance too. Further strain related to how insurer operations had to be adapted to remote working and dealing with channel overload. And despite these challenges on operations, the insurance sector – in particular short-term insurers – initially expected the impact on claims to be relatively manageable. Most insurers learned lessons from the SARS outbreak of 2003 and introduced exclusion clauses for communicable diseases and epidemics/pandemics into their non-life products such as business interruption (BI) and travel insurance .
As a result, most BI insurance available in South Africa only covers physical damage to an organization's assets which render it unable to operate - so insurers’ positions were that coronavirus related claims were not covered by these policies. Then came the government-enforced nationwide lockdowns to curb the spread of the virus and the situation needed to be reassessed. Government, pressure groups and the media voiced their concern over the position that most insurers had taken on BI insurance cover, along with the impact on potential pay-outs to customers. There were significant parallels to the recent issues in the UK banking sector on payment protection insurance and interest rate hedging 4 and against this backdrop, claims needed to be considered quickly and individually on their merits. The key was to get money paid out rapidly to those who needed it the most.
