Insurers struggle with COVID-19 payments

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MISCALCULATION:
Taiwan Ratings Corp director Andy Chang said property insurers had struggled to find growth and saw COVID-19 as a big opportunity.

Taiwan’s worst COVID-19 outbreak has left the country’s insurers bracing for more than US$1 billion in claims that the financial regulator is urging them to honor.

Financial Supervisory Commission Chairman Thomas Huang (黃天牧) ordered insurers to pay out valid COVID-19-related insurance policies after lawmakers criticized them for rejecting claims, voiding policies and delaying payments.

Insurers are seeking to limit their losses on policies after underestimating the extent of the disease.

Photo: ANC

There are more than 6.3 million COVID-19-related policies still active and another million awaiting approval, the commission said.

As of Monday last week, insurers had paid out more to customers – NT$2.58 billion (US$87.9 million) – than the NT$2.12 billion in revenue they received from premiums, according to the statements of the Insurance Office.

With only around 2% of policies experiencing claims so far and the outbreak showing no signs of abating, insurers face a wave of new claims next month and into July.

Speaking to lawmakers on Monday last week, Huang said the payouts would likely be higher than the NT$41 billion estimate lawmakers mentioned.

Although this is only a tiny fraction of the NT$2 trillion in net assets held by the local insurance industry, the majority of these are held by large life insurers.

Potential claims represent about 25% of assets held by property insurers, which were among the most active in selling COVID-19 policies.

Property insurers, which mainly focus on vehicle protection, have struggled to find growth in recent years and have seen COVID-19 as a big opportunity, the head of Taiwan Ratings Corp (中華信) said.評), Andy Chang (張書評).

When developing their risk models, many miscalculated the potential number of cases by a factor of almost 100. They also failed to correctly estimate the capital cushion needed.

“They shouldn’t have just said, ‘How much are our competitors selling? We want to sell that too,” Chang said over the phone.

Even the largest local insurers risk suffering.

Claims at Fubon Life Insurance Co (富邦人壽) and Cathay Life Insurance Co (國泰人壽) could reach NT$5 billion, or around 2% of their net income this year, Bloomberg Intelligence analyst Steven Lam wrote. in a May 13 memo. .

The generosity of policies sold by insurers is an important part of the problem. Since the onset of the COVID-19 pandemic, many companies have offered policies to protect customers from the negative health effects of COVID-19 and associated costs.

Quarantine insurance is among the most popular. For as little as NT$666 a year, insurers guaranteed to pay NT$50,000 if the customer was required by the government to self-isolate. If the client then tested positive for COVID-19, he could get an additional NT$50,000.

Statistics from the Life Insurance Association (壽險公會) showed that the local insurance industry reported total premiums of NT$733.33 billion in the first four months of this year, a decline of 20. 6% compared to the same period last year, of which first-year premiums decreased by 15.3% year-on-year.

The Taiwan Insurance Institute (保發中心) estimated that the industry could see its total premiums fall by 18% this year due to a substantial drop in premiums for investment-related insurance policies, according to the Liberty Times in Chinese language (Taipei Times sister newspaper) reported yesterday.

Additional reports by staff writer

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