27 Apr 2020
Posted in Insurance
US life and health carriers expected to see most severe COVID-19 impact, says GlobalData
The life and health insurance sectors are expected to be more strained than property and casualty carriers in the US due to the nature of the country’s healthcare system, according to GlobalData, a leading data and analytics company.
The main reason for this is that life and health policies do not contain pandemic exclusions, while policies such as business interruption and cancellation insurance generally 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%. Declining GWP growth will not be the insurers’ major concern, however, with claims set to rise significantly in this sector, in 2020 especially.
New requirements have already been announced. Insurers are imposing a waiting period on customers wanting to travel abroad, while people who survived the virus will face premium price hikes.
Deblina Mitra, Insurance Analyst at GlobalData, comments: “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.
“However, the industry is going to register development on pandemic covers. 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.”