The role that the insurance industry has to play amid the COVID-19 outbreak is significantly huge. It is similar in case of natural disasters, or similar epidemic or a recession. The number of confirmed cases has passed 300K from stats all over the world. In comparison with other countries, the health risks with COVID-19 are lower in Canada. The public health agency of Canada has given this confirmation. They stated in their statement that Canada’s risks with ‘COVID-19’ are far lower than other countries including the USA.
There are huge fears and panic that relate to the virus since it started spreading and created chaos all over the world. The fears are related to the risks that are arising every day due to ‘COVID-19’.
There are fears amongst the businessmen and business communities of a complete lockdown. The insurance companies are the only financial institutions that can cover these losses. Being a highly saturated industry and financially sustainable, its role is paramount. New businesses, assets and high-profile businesses in Canada are mostly insured.
The types of insurance people normally have are health, property and business insurance for similar types of circumstances and situations. Car insurance is a must in Canada, and therefore, while at risk the life insurance is also a huge necessity. Whether its life or business insurance, the most concerning factor is the associated risk. The amount of risk associated will automatically have an effect on the insurance value and vice-versa.
Furthermore, in case of a lockdown or a dry period in business. Insurance is claimable in drastic scenarios as most businesses are insured. Businesses, especially new, needs a cover to combat unpredictable scenarios. To get out of an extreme situation the recovery time is an essential element. The situations include natural disasters, epidemics, and pandemic.
HOW INSURANCE COMPANIES WORK
Re-insurers are huge companies that insure insurance groups. These are mega financial institutions that are there to cover the losses made by the insurance companies.
Most companies can’t predict natural disasters, calamities and situations like Pandemics and related epidemics. Hence, they can have a tendency to take huge losses. An example of a Re-insurer company is Munich-Re, as it is a huge company that insures the insurance companies globally. These companies handle risks that are too large for companies to handle. These risks include political turmoil, disasters, pandemics, natural disasters, and political conflicts. The reinsurers also make it possible for the primary insurers to keep less capital on hand so that they can cover the potential losses.
The losses are on a global scale being unbearable and unpredictable. COVID-19 is a pandemic that is a cause of many deaths and financial losses. The Re-insurers from the insurance industry is deeply monitoring and controlling the financial losses in the current scenario.
As an example, we can assume that Munich-Re is the re-insurer for the insurance group called Aviva. In order to avoid bankruptcy and financial losses. One of the largest re-insurers, Munich-Re will cover the Aviva group. This is in similar crisis situations like COVID-19. To be exact it’s like claiming their own cover while the insurance companies incurred losses in business activities.
THE FEAR FACTOR – CANCELLATION OF EVENTS
The long term effects of the disease and its effects on people are linked with the fear factor of what’s related to the impacts. The insurers and the business community should have a fear of the long-term effects and impacts of such a pandemic that has caused huge deaths worldwide.
The summer Olympics of Tokyo can be taken as an example. A huge event taking place in Tokyo Japan, with mega investments as well as the involvement of so many countries. In short, it is one of the mega sports events, similar in stature to a football World Cup, as the viewership and audience are mammoth. The fear factor is the cancellation of the Summer Olympics. Meaning the involvement of the insurance industry and further according to the size of the event the re-insurance companies as well. The involvement of re-insurance companies is not direct but is always impactful to make situations stable.
WORLD TRAVEL & TOURISM INDUSTRY
Other such examples are the Travel and Tourism industry that alone in Europe gives a huge amount of profits to the governments. Italy alone was a major hub of travel and tourism in Europe with places like Rome, Milan, Venice, and Capri being tourism spots for the whole world. The country has suffered huge losses in terms of its tourism industry coming to a halt. Travel insurance is yet another insurance sector that has suffered due to cancellations of flights, buses and road trips due to ‘COVID-19’. Hence, the travel and health insurance i.e. medical insurance are the two most famous insurances linked with the tourism sector. The losses have been bilateral if we think with a financial perspective.
Ironically, the role of the insurance industry, in any case, has been to bring stability to drastic situations and extreme circumstances.