Analysts at data and analytics firm GlobalData believe that the COVID-19 pandemic will put more strain on the life and health insurance sectors in the US than their property and casualty counterparts.
GlobalData said this disparity is partly due to the nature of the healthcare system in the country.
Life and health policies also do not generally contain pandemic exclusion, whereas policies such as business interruption and cancellation insurance usually do.
Furthermore, for health insurers, relaxation in co-payment and other treatment costs will add massively to the claims cost and could completely wipe out insurers’ 2020 earnings, based on the projected maximum infection rate.
GlobalData has revised down its forecasts on the US life insurance market to 2024 following the impact of COVID-19. It is now expected to grow at a compound annual growth rate (CAGR) of 2.7%, down from 3.3%.
The most significant drop in growth will be in 2020, with GWP growth falling from 3.2% to 1.9%, although GWP growth will not be the major concern as claims are set to rise significantly in this sector, in 2020 especially.
New requirements have already been announced and insurers are imposing a waiting period on customers wanting to travel abroad, while people who survived the virus will likely face premium price hikes.
“This coupled with the new conditional stipulation on the sale of term life plans without medical tests, is going to weigh down the short-term growth prospects of the industry,” said Deblina Mitra, Insurance Analyst at GlobalData.
“However, the industry is going to register development on pandemic covers,” she added. “Cover of infectious diseases for companies enjoyed limited exposure previously, but Marsh has already reported a spike in interest. This will be an opportunity for long-term growth for insurers after the short-term impact has worn off.”
