Covid-19 pandemic has made a deep impact on insurance market, just like most other markets and businesses. Insurance market has paid large sums of compensations especially in certain lines, and will probably enter a challenging period following the pandemic due to changing customer behaviors and recessions.
Coronavirus pandemic, which was initially reported in China in Decem- ber 2019, has rapidly spread across the entire world, and resulted in a health disaster along with a serious economic crisis. As a global threat, COVID-19 has left shattering marks on USA and European countries, infecting millions of people and killing hundreds of thousands. Coopera- tion and strength of health systems in every country have been most im- portant factors during the course of pandemic, and countries with robust health systems have recovered relatively more easily. When it comes to the strength of health infrastructures, private health insurance has been one of the major items put under the spotlights. Normally, private health policies do not include pandemic risks in the scope of coverage, and there- fore, have not covered for the treatment expenses of COVID-19 patients. Insurance companies in Turkey took swift actions to address this problem and announced that they will cover the pandemic risk with private health insurance policies as ex gratia payments.
Health insurance products tested
Health insurance products were considerably tested in terms of impor- tance and functionality. Therefore, after the pandemic, it is estimated that health insurance policies covering pandemic risk will come to the forefront for many health insurance products, especially for group health insurance plans. However, expanding coverage of policies by adding pan- demic risk into the scope will naturally result in premium increases. So, experts state that we may see two different types of policies: ones include and exclude the pandemic risk.
Shifting the global balances to a great extent, the pandemic has resulted in changes on a global scale due to the economic losses it has caused so far. As a business that is based on risks, insurance market is estimated to experience one of the greatest impacts due to the coming changes. Insurance market experts state that pan- demic risk will continue to exist in the coming future as a phenome- non threatening human lives. It is estimated that several other viral illnesses may emerge in the coming future depending on the increase of global population and social relations and further globalization; just as avian flu, swine flu, SARS, MERS and ebola virus pandemics did in the past. Pandemic risks naturally concern health insurance market, and awareness about health insurance products is expected to climb as they become highly preferred products after this global pandemic. In parallel, renewal rates for health insurance policies are also expected to increase.
The market will become digital
Apparently, risks will not be the only factor impacting insurance market on a global scale after the coronavirus pandemic. The market is also expected to be impacted by changing customer habits, which my result in changing the business manners. There has been a trend of digitalization in the insurance market, par- ticularly for the last 5 to 10 years. Insurance market has been altering most of their business processes in accordance with technological developments, and this has also included online insurance. As customers tend to address most of their require- ments over online platforms, insurance market began to incline towards online channels, too. Customers who preferred to insure their risks but had to stay at home due to social isolation and constrictions during the COV- ID-19 pandemic, preferred to buy from online sales channels.
Accordingly, as a market that has already begun to transport their business processes to dig- ital platforms, insurance mar- ket is estimated to put greater emphasis on digital channels in the coming days with the aim of addressing this inclination of customers. The market is expected to take steps towards expanding the range of prod- ucts sold on online platforms. Moreover, insurance compa- nies that have had to transition to remote working model dur- ing the pandemic, are estimat- ed to switch to hybrid working models in the coming period.
Furthermore, assistance servic- es which are indispensable for the insurance market will be- come more diversified follow- ing the pandemic. Assistance services ranging from psycho- logical consultancy to vehicle maintenance or dental care, which are offered as additional services to insurance policies, have brought many benefits to policyholders during the pan- demic. Especially online med- ical examination services of- fered as a part of private health insurance policies have been widely used by policyholders during the isolation days. As a result, insurance companies are expected to diversify such ser- vices in the coming terms.
Huge amount of compensations could be paid for travel health and organization insurance claims
Insurance market has faced huge amounts of compensation payments in certain branches. Many countries closed their bor- ders and limited air, land and sea travels during the pandemic, which resulted in travel bans and restrictions. Nearly 4 million policies are issued every year for travel health insurance which is compulsory before travelling abroad, and over 20 thousand travel reservations are estimated to have been cancelled since
March due to the coronavirus pandemic. Insurance market has experienced serious losses due to the coverage of cancellations in travel insurance, as well as in organization insurance which cover the cancellation of big events and organizations. Cancella- tion of gigantic global organizations such as the Tokyo Olympics and UEFA Euro 2020 Championship are estimated as one of the most important problems currently faced by the insurance market.
Recession will shrink the insurance market
Global impacts of coronavirus on the insurance market are not limited to those discussed above. Changing customer behaviors have resulted in insurance needs being pushed into the back- ground. Individuals have abstained from renewing their exist- ing policies and been reluctant to buy new products during this time of uncertainty. Financial markets have experienced neg- ative impacts as well; therefore, growth of insurance market, which normally grows in parallel with the economy, is expected to remain limited. Economic slowdown is estimated to cause a global shrinkage in demand for insurance. However, the decline in claims during when we slowed our social lives might be a bal- ancing factor in this respect.
Slowdown of global trade has been another factor impacting the insurance market. Due to decelerating foreign trade activities, marine insurance branch is expected to shrink. These problems in trade activities will probably raise claims in credit insurance, too. Moreover, potential setbacks in the supply chain are expect- ed to impose negative impacts on spare part costs, which will be a serious concern for auto insurance. Experts refer to the impor- tance of 2020 and 2021 in terms of financial loss management for motor own damage and traffic insurance. They are warning that financial losses might even outpace physical losses, which normally constitute the biggest cost item for those branches. The market is also contemplating on insurance pools which are normally established due to the frequency of risks and size of losses. An article published by the reinsurance giant Munich Re discusses the possibility of establishing insurance pools to ad- dress the pandemic risk.
Turnover reductions are expected
According to a report named “Impact of COVID-19 on Different Categories in Turkey” which was published by Deloitte, insur- ance is one of the markets that have experienced highly negative impacts. The market is estimated to suffer from an interaction loss of 30 to 50 percent. The report states that tax, tender, insurance and B2B portal interactions were observed to have suffered from a sharp declining trend. Furthermore, a survey by KPMG called “Impacts of COVID-19 from the Perspective of the Business World” indicates that turnovers of insurance companies are expected to decline by 2 to 20 percent in 2020.
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