The International Association of Insurance Supervisors (IAIS) has highlighted the essential role of insurers at this time of distress, providing protection against “heightened uncertainties created by the pandemic.”
As the implementation of lockdown and social distancing measures accelerated and intensified across much of the world, it became clear that the COVID-19 pandemic was creating a global public health emergency with significant human and economic consequences.
During these unprecedented times, insurance can be an essential service for both businesses and individuals in need, explains the IAIS in a recent industry note.
However, for carriers to be able to effectively play this role, and ultimately contribute to economic recovery, the IAIS has stressed just how important the stability of the sector is.
“To this end, the IAIS has been closely monitoring developments and actively coordinating with other standard-setting bodies and the Financial Stability Board (FSB) to assess the impact of Covid-19 on the global insurance sector,” says the IAIS.
Through its discussions of the supervisory responses to the pandemic, the IAIS says that it has highlighted the importance of effective policyholder protection and fair customer treatment at this time.
The IAIS says that it supports the efforts made by some carriers to support policyholders, which includes measures like alternative distribution, flexible premium payments, and also premium rebates in areas like auto insurance.
“In circumstances where pandemic risks are covered by a policy, it is important that insurers pay out such claims in a prompt and efficient manner. Efficient claims handling and clear communication with policyholders regarding coverage for losses arising from Covid-19 should help deepen confidence and trust in the insurance sector and contribute to longer-term economic recovery efforts,” says the IAIS.
Of course, paying valid claims is of the utmost importance during times of severe stress, but at the same time, advises the IAIS, it’s extremely important that insurers aren’t forced to pay for COVID-19 related claims for which they collected no premium.
This is an issue that has been well documented throughout the pandemic, and relates to legislative efforts in some parts of the world seeking to force insurers to retroactively cover certain COVID-19 related claims, such as business interruption, regardless of exclusions.
“In such cases, the costs of claims against losses have not been built into the premiums that policyholders have paid for their insurance. Requiring insurers to cover such claims could create material solvency risks and significantly undermine the ability of insurers to pay other types of claims,” says the IAIS.
Ultimately, warns the IAIS, initiatives like this could threaten policyholder protection and financial stability, which in turn would serve to further aggravate the financial and economic impacts of the current crisis.
In an effort to address the ongoing COVID-19 outbreak but also future pandemic events, there’s been an increasing dialogue between the public and private sector in numerous regions. The IAIS notes that this “widespread pandemic” has revealed just how limited the types of coverages are that can reasonably be offered by the risk transfer sector alone.
“The IAIS, therefore, encourages efforts seeking potential solutions to protect businesses and individuals against these types of risk, and stands ready to help facilitate these discussions at the international level,” says the organisation.
