Covid-19 Idea Pulse Alerts: Week 5

INSURER ACTIONS BETWEEN JUNE 27 AND JULY 10, 2020

The Idea Pulse series on COVID-19 monitors innovations and insurer strategies that are being shaped in response to the COVID-19 pandemic and the prolonged “new normal”. These are some of the noteworthy developments across the global insurance industry in the fortnight of June 27 to July 10, 2020.

Travel Insurance Products

UK travel intermediary ROCK Insurance Group announced the launch of a business policy – the first to market for travel operators impacted by COVID-19 related travel disruptions. The policy covers travel agents against cancellation costs if a customer cancels holiday bookings due to testing positive to COVID-19, allowing the agent to change the booking and recover additional costs in doing so.

ROCK Insurance also has travellers covered under a new travel insurance policy which covers insureds for emergency medical care and repatriation if they contract the virus when abroad. Customers are also covered if their holiday accommodation closes due to coronavirus before the end of their stay. The key benefit of ROCK Insurance’s travel policy is that it covers pre-departure cancellation if travellers test positive for COVID-19 (even if this is at the airport) and cannot travel. The product is flexible so if there is a COVID-19 flare-up in a destination, customers will be allowed to change dates or destination ahead of their trip without admin fees. Customers can also cancel the policy if the UK or the customer’s local area enters into a lockdown within fourteen days of policy purchase.

Travel insurers in Europe have also launched specific products keeping customer holiday preferences and concerns in mind. For example, anticipating a majority of holidaymakers will opt for domestic travel and short trips, Spanish insurer ARAG has launched Special Stays, a policy that covers inter-provincial travel and also day trips to Portugal, France and Andorra. Some of the product’s more competitive features include convalescence at a hotel if necessary, professional chauffeur dispatch or early return, travel cancellation costs for up to 20 different causes and more, all without any restrictions for coronavirus. Also foreseeing that customers will take their pets with them on domestic trips, ARAG has launched pet assistance coverage through ARAG Special Estancias policy, a novel incentive to address as many customer concerns as possible to promote travel in the current climate.

Insurtechs are not far behind. French insurtech Koala offers flight disruption insurance, providing instant compensation for flight delays and cancellations through a B2B2C model. Koala recently announced new partnerships to assist customers with COVID-19 related travel uncertainties. Over the next three months, Koala will be available in the booking journeys of two airlines and four travel agencies. Koala also announced this month that they have received funding of 1.6 million euros, led by London based incubator and fund Insurtech Gateway alongside Playfair Capital, Techstars Ventures, and private investors.

Koala broadly describes its products as “data-driven” without referring to parametric insurance or the underlying technology. Just before the global coronavirus outbreak, in late 2019, Axa had discontinued sales of their flight delay parametric insurance product “Fizzy” due to poor demand. Fizzy was developed on the Ethereum blockchain. Axa had reported that there was not a sufficient market appetite for a blockchain-based consumer insurance product at the time. While this may still be true, in the unpredictable “new normal” of COVID-19, the timing looks right for new parametric travel insurance products.

Life and Health Assurance

In the US, Massachusetts Mutual Life Insurance Company (MassMutual) announced a nationwide expansion of MassMutual HealthBridge, a free term life insurance plan offered to frontline healthcare workers who directly interact with coronavirus patients. Previously, HealthBridge was available in MassMutual’s home states as well as those hardest hit by the pandemic. MassMutual’s HealthBridge program offers free, 3-year term life policies of up to $25,000 for eligible healthcare workers. Employees and qualifying volunteers of healthcare or emergency medical service providers who are testing, treating or evaluating patients for COVID-19 can apply for these free policies. MassMutual expects that HealthBridge will eventually total $3 billion of insurance coverage for American healthcare workers.

As coronavirus cases surge daily in India, the Indian Insurance Regulatory and Development Authority (IRDA) has offered some relief to customers by bringing consistency in COVID-19 coverage in the form of two standardised health products. IRDA has instructed all health insurance companies to launch indemnity and fixed benefit plans, “Corona Kavach” and “Corona Rakshak” respectively. The key feature of these plans is the uniformity of policy wordings across the market.

Corona Kavach, which is a standard health policy, will cover the charges of treatment of any co-morbid infirmities, including pre-existing maladies, along with the treatment for the coronavirus infection. In “Corona Rakshak“, if a positive diagnosis of Covid-19 requires hospitalization for at least 72 consecutive hours, a one-time compensation equal to 100% of the insured amount will be paid in one lump sum.

Businesses in India are partnering with insurers to offer COVID-19 health cover as a customer incentive for purchasing their products or services. Budget Airline SpiceJet has collaborated with digital insurer Go Digit General Insurance to offer coronavirus hospitalisation cover to flyers, at a low, affordable premium. Passengers can opt for the insurance cover ranging between 50,000 to 3,00,000 Indian rupees ( approximately $ 660-$4,000) at a low annual premium between 443 to 1,564 Indian rupees (approximately $ 5-$20).

Consumer electronics giant Panasonic India has tied up with Pramerica Life insurance to offer COVID-19 medical insurance cover to purchasers of its cameras such as photographers and videographers covering news and events during the pandemic. The insurance cover of up to 100,000 Indian rupees ($1,329) is valid for one year from the date of purchase and offered on purchases made by customers between 9 June and 31 August. Interestingly, the size of the cover depends on the price of the camera and will vary from 25,000 to 100,000 ($332- $1,329) Indian rupees, for cameras priced between 50,000 ($664) to over 150,000 rupees ($1,995). Panasonic is also covering sub-dealers with a standard 100,000 rupees ($1,329) medical cover to facilitate wider distribution to consumers.

Systemic Risk Management

COVID-19 has exposed the vulnerability of globally integrated supply chains to other potential systemic risks such as worldwide cyber-outages and climate change. Now, Lloyds of London has taken the lead in moving forward with the challenges posed by COVID-19 and systemic risks, through a series of market innovation initiatives that were made public last week.

A set of proposals announced by Lloyds include reinsurance frameworks to fast track economic recovery from systemic catastrophes such as the current pandemic. Lloyds is also setting up a Centre of Excellence to co-create products that provide better protection against systemic risks.

In the first initiative, Lloyds, in collaboration with its UK and Global Advisory Groups has published three open source frameworks designed to improve economic and societal resilience to systemic risks.

The first framework is a non-damage business interruption solution called ReStart, designed to offer non-damage business interruption coverage for future waves of COVID-19. The product is initially intended for UK SMEs with cover provided by pooling limited capacity across a number of Lloyd’s market participants. The product would support SMEs reopening, by offering a range of limits that ensure coverage is affordable for customers without requiring any government support.

The second framework, Recover Re is a proposed ‘after the event’ insurance product framework that can provide immediate relief and cover for non-damage business interruption over the long-term, including the current pandemic. The expected outcome is providing immediate relief and cover for non-damage business interruption, including the current COVID-19 pandemic, with some government support depending on the scale of the event.

Finally, Black Swan Re is a reinsurance framework that proposes government and industry partnership through a government-backed pool to reinsure systemic risk from commercial non-damage business interruption cover.

Lloyds innovation accelerator Lloyds Lab also announced the names of three insurtechs selected for their fast-tracked cohort 5 specifically centred around bringing COVID-19 products and solutions quickly to market. Metabiota, a data analytics start-up specialising in modelling epidemic risks is part of this group. Metabiota plans to work with Lloyd’s to provide epidemic risk data, indices, modeling and other analytic tools to support the development of innovative epidemic-related insurance coverage. Incidentally, Metabiota had previously collaborated with Marsh and Munich Re to create Marsh’s 2018 standalone pandemic insurance product PathogenRX. Other alumni include cohort 3 member Predicat, specialists in predicting emerging risks and Dialogue Exchange, a start-up focused on digitally streamlining the Credit and Political Risk Insurance (CPRI) marketplace.

Other industry experts are taking on the challenge of developing systemic risk solutions as well. A group of insurance industry executives have announced the formation of Ten C’s, a startup that will develop parametric insurance for business interruption due to pandemics and other systemic risks. Ten C’s plans to bring together a global team of data scientists, artificial intelligence, blockchain, insurance and risk transfer experts to define new solutions and thinking for systemic risk cover.

Ten C’s announcement comes against the backdrop of news that Wimbledon Tennis Championship organisers have been unable to purchase pandemic insurance protection for 2021. Wimbledon, one of the few major sporting events that had pandemic insurance in place since the SARS outbreak in 2003, is expected to receive a claim payout to the tune of £114 million after the 2020 tournament edition was cancelled due to COVID.