The COVID-19 pandemic has infected more than 670 million worldwide and in Asia alone, more than 200 million people were infected. And these figures only refer to the number of people infected. Millions more were affected by this pandemic outbreak that some had perceived to be a one in 100 years event – people's physical and mental health were affected, businesses struggled to cope with the lockdowns or movement restrictions, governments and health systems were under tremendous pressures.
On the panel:
Summary
I. Introduction
The COVID-19 pandemic has infected more than 670 million worldwide and in Asia alone, more than 200 million people were infected. And these figures only refer to the number of people infected. Millions more were affected by this pandemic outbreak that some had perceived to be a one in 100 years event – people's physical and mental health were affected, businesses struggled to cope with the lockdowns or movement restrictions, governments and health systems were under tremendous pressures.
Now in 2023, three years on from the start of the outbreak, restrictions have almost all disappeared, and life seems very much back to pre-pandemic days, albeit with lingering effects such as hybrid work becoming more of a norm. However, is the pandemic really behind us, or are there any residual effects that, as an industry, we should be thinking about? What are some of the lessons to be learnt from this pandemic to prepare us for such events in the future?
The Global Asia Insurance Partnership held a panel discussion in April with a group of insurance industry experts, where the conversations centered around what are the impacts of the pandemic on the insurance industry – both the good and the bad, what lessons have we learnt, and most importantly, what can we do now to better prepare us, and the community at large, for the future?
This note seeks to highlight the key points from the panel discussion.
II. The Impacts of the Pandemic on the Insurance Industry
A study into the impacts of the pandemic on mortality projections was conducted by the Nanyang Technological University. This study shows that the pandemic has affected countries in East and Southeast Asia unevenly, with more developed economies generally faring better than their less developed counterparts. Factors such as robust healthcare systems, and swift implementation of public health measures have contributed to lower mortality rates in countries like Singapore, Japan, and South Korea. However, England and Wales had worse mortality rates than Singapore, Japan, and Korea, possibly due to differences in adoption of public health measures. The impact of COVID-19 on mortality rates also varied across different age groups and changed over the course of the pandemic. Older populations have generally faced higher risks, with excess deaths skewing towards older age groups. All these and the projections of future mortality rates under six different scenarios also showed that the financial impact of mortality shocks due to the pandemic can be significant for mortality-sensitive products in the insurance industry.
Further, the long-term impact of COVID-19 on morbidity projections is not yet clear, but studies suggest a potential increase in long-term symptoms and risks of cardiac arrest, diabetes, and stroke. Continued monitoring of mortality and morbidity data is crucial for drawing conclusions on how mortality and morbidity rates will evolve in the future. Unknown factors such as the long-term impact of COVID-19 and new variants may have significant implications on mortality and morbidity rates.
Whilst we do not expect there to be significant changes to product design and underwriting within the insurance sector due to the pandemic, with the unknowns, insurers are closely monitoring the impacts and, it is likely that non-guarantees and relevant exclusion clauses may emerge if significant detrimental impacts materialize.
Despite the challenges, the pandemic has also raised awareness about the importance of insurance, particularly health insurance. As the pandemic continues to affect lives and livelihoods, people are increasingly recognizing the value of having adequate coverage to protect themselves and their families from unforeseen circumstances. Improving insurance penetration is one of the avenues to narrow protection gaps and this raised awareness for the need for insurance is a good step forward in improving insurance penetration.
The pandemic has also accelerated the adoption of non-face-to-face solutions for insurance sales and encouraged insurers to explore more accessible channels for reaching customers. By leveraging technology and digital platforms, companies can provide better access to their products and services, especially for those in remote locations or with limited mobility.
III. Key Lessons Learned from the Pandemic and What Can We Do Now
The pandemic has taught us many lessons about how to better prepare for and respond to future events.
Firstly, collaboration and communication between governments, insurance industry, and healthcare providers is crucial. The pandemic has shown that by sharing information, coordinating efforts, and communicating in a timely manner, these stakeholders can work together to help ease the strains on people affected by the pandemic, be it financially or health-wise.
Health-wise, swift response and efficient collaboration between the governments and healthcare providers have proven to be critical during the pandemic, be it around medical care for infected patients, availability of medical supplies and medical facilities, or the implementation of vaccine programs. Financially, an example would be in Singapore, where the Monetary Authority of Singapore worked with the insurance industry through the industry bodies, to swiftly implement nation-wide premium deferment schemes for people financially affected by the pandemic, to ensure that their insurance coverage remains intact even when they are financially strained and struggling to afford their insurance premiums.
It is important that the stakeholders maintain their focus on efficient collaboration and communications with one another and seek to enhance this in preparing for the next event.
Secondly, stress testing, scenario analyses, business continuity plans – these are all vital for insurance companies to evaluate their ability to handle crises. These have proven to have been helpful when the pandemic struck.
Business continuity planning (BCP) is something that most companies have in place and whilst sometimes seen as a ‘'check the box" exercise in the past, when the pandemic struck, with the various lockdowns and movement restrictions, the business continuity plans have ensured that companies know what they need to do immediately and were able to activate the plans and react accordingly.
Stress testing and scenario analyses too, have proven to be very useful. For example, in Australia, as part of regulatory capital requirements, insurance companies were required to conduct stress tests with pandemic scenarios. And while the actual pandemic wasn't the same as the scenarios used in the stress testing, it did help companies think through what they might have to do in terms of capital, in terms of which of their products might be most stressed, etc. This had indeed helped prepare the companies better in the face of the actual pandemic.
Now that we have experienced an actual pandemic, it is crucial that we learn from this and previous experiences and make improvements in the BCP, scenario analyses, and stress testing, not just for the insurance industry, but all stakeholders at large.
Thirdly, availability, accuracy and accessibility of data is critical for effective understanding of the implications of the pandemic and other unforeseen events, and without this, the ability to enhance stress testing and scenario analyses as mentioned in the point above will be limited.
There was much variation across jurisdictions on how much data was collected, how they were collected, the availability and the timeliness of the data collected. Sometimes, it may be the case that data was not even collected in the first place. In jurisdictions where they are available and accessible, that has enabled the deep analysis of the mortality implications, as per the study conducted by the Nanyang Technological University. However, in many jurisdictions, the data were either not available, or not accessible, and hence, the study was unable to cover those countries in the analysis.
Without sufficient and accurate data, we will not be able to deeply understand the implications of the various risks we face, such as the pandemic, and yet, this is the first step to achieving risk resilience and narrowing protection gaps – the understanding of risks and the ability to quantify them.
As one of our panelists, Jennifer Lang, mentioned during the discussion – "…it's really valuable to build up that muscle of collecting and distributing data about all sorts of aspects to the health system because you don't actually realize what's going to be important until you get there." It is critical that the insurance industry, in collaboration with other stakeholders such as the governments and healthcare providers, work together to strive for better data collection, accessibility and sharing, to enhance our preparedness and resilience for future crises.
IV. Conclusion
In conclusion, the COVID-19 pandemic has had a significant impact on the insurance industry and has highlighted the importance of preparation and planning for future events. The pandemic has taught us many lessons, including the need for collaboration between governments, insurance industry, and healthcare providers, stress testing, and enhanced communication and data accessibility. To better prepare for the future, the insurance industry must be prepared for the unexpected, scenario plan for various situations, and be agile and nimble to constantly adapt and innovate. The long-term effects of COVID-19 require ongoing monitoring and research, and collaboration between industry and inter-government agencies is crucial. The pandemic serves as a reminder of the importance of planning and preparation and the insurance industry's response to COVID-19 can serve as a learning opportunity for future crises. Learning from past experiences and not being complacent is essential to face future challenges.
