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BUSINESS INSURANCE AFTER COVID-19

On 24 March 2020, the lives of all South Africans changed dramatically when President Cyril Ramaphosa announced a nationwide lockdown and we entered a time of uncertainty. Wearing masks, social distancing and working from home became the new normal. 

Employees were worried about their jobs, and Employers were concerned about being able to keep their businesses open and looking after their Employees in this trying time. 

Insurance is a complicated business involving numerous processes ranging from administering existing policies, pricing new business, selling new business, renewing policies, addressing customer inquiries, and processing claims. Add to this the highly intricate interplay between insurers themselves and their external networks. It is, therefore, no surprise that Covid-19 poses a wide-ranging series of challenges for insurers to maintain their operations as typical ways of working become severely disrupted. The insurance industry is learning, adapting to the new circumstances and evolving as they go. It seems to have gone better than probably expected. Despite some teething issues, insurers have generally been encouraged by their ability to adjust.

In many ways, the situation has accelerated a trend that already existed. Many insurers have been looking at ways of increasing their operational digital footprint and connectivity, with a lower reliance on physical co-locations of people. Putting it in place in a period of only 2-3 weeks instead of 2-3 years is a considerable achievement.

Neal Baumann, Global Insurance Leader at Deloitte, said the following about the potential long term impact of Covid-19 on insurance companies: “We expect the financial impact of Coronavirus upon (re)insurers to be specific to the circumstances of each enterprise, the classes and mix of business they underwrite, their pricing and reserving, policy wordings and reinsurance coverages”. Click Here for more

For insurers, the Covid-19 outbreak includes a surge in health, travel and business interruption claims, pressure on sales from reduced business activity, and less use of face-to-face channels. The economic slowdown from the pandemic is driving interest rates even lower and increasing credit risk exposures from businesses facing possible default. It raises the possibility of regulators asking for extraordinary solvency tests to ensure insurers can withstand the immediate and knock-on impacts. This list of issues represents a big test of resilience for an industry already weighed down by enduringly low-interest rates and slow growth in mature markets. 

The importance of the right type of Business Insurance got pushed into the limelight with the outbreak of Covid-19. In terms of insurance policy benefits, the ramification of the coronavirus shutdown should not be confused with where a contract cannot be started or completed, for reasons beyond anyone’s control. The first step for a business is to get professional advice on whether it is entitled to any insurance benefits against the consequences of the state of disaster. If a company’s coverage includes business interruption, the impact of an infectious disease or pandemic like the Coronavirus might be covered. However, this will be assessed in light of the particular insurance contract. 

As well as growing concerns in respect of potential liability, there are financial risks that result from business interruption during this pandemic. Forms of possible loss under these circumstances can be categorized as economic loss due to the complete shutdown of a business; property damage and loss of assets due to vandalism, non-usage of buildings and also the loss of human resources due to resignations, death or forced retrenchments.

From a business perspective, the pandemic serves as a big test in terms of internal structures and what contingency plans were put in place to ensure the survival of a business in volatile economic conditions. Our safeguards lie in the efficient implementation of pre-existing contingency plans and also in our relative adaptability amongst such volatility.

Business continuity is the capability of a company to plan for and respond to incidents. This process or plan is activated when an event that has the potential to interrupt standard operations occurs. The Covid-19 virus has made this a reality for every business no matter what size or industry sector.

In an attempt of minimizing risk to employees and reducing the spread of the virus, many businesses have converted to working remotely. With workers compensation insurance, your employees are covered when an injury or illness occurs within the scope of their employment. 

Most commercial policies issued in South Africa do not protect against loss of revenue. There are extensions of cover available in the South African market; however, there are also exclusions from cover in some policies.

At First International, we pride ourselves in understanding the individual insurance needs of your business. We are ready to help you get the best policy for your business, especially to make sure that should anything like this pandemic ever happen again that you, your business and your employees are covered.

Stay Alert. Control the Virus. Save Lives