The coronavirus outbreak has dispelled the illusion of sustainability humans enjoyed coming into the 21st century. Now, the curtains on it have been lifted, and the world population stares at the horrors that could befall it if not careful.
The pandemic situation has raised the levels of anticipation near to an apocalyptic film. Also, quite grimly so, the coronavirus outbreak has shown the fragility of our social and economic structures; it took only a mutated virus to quake the foundations of these years-of-evolved systems.
Table of Content
1. Overview of economic conditions due to Covid-19
The wide-scale lockdowns in most parts of the world have engendered the worst economic crisis since 2008–09. Some experts suggest the situation might even be worse than the stock market crash of 1973–74.
The first blow to the global economy came when the Chinese dispensation started implementing lockdowns, first in the Hubei district and then in the rest of mainland China.
China is one of the world’s leading exporters of electronic raw materials and goods, plastics, and electrical machinery. Thus, the lockdown impacted not only its own economy but also economies reliant on its exports for production.
The situation worsened when the global stock markets started dropping points in early February. The anticipation of Covid-19 and grim conditions of China, South Korea, and Japan had set off time bombs in the stock markets.
On 20th February, the first time bomb went off when indexes like Nikkei 225, S&P/ASX 200, and Dow Jones Industrial Average underwent market corrections. Thus began the infamous Stock Market Crash 2020.
However, amid this economic and social chaos, one industry that remained unperturbed and instead held expectations to flourish was the general and life insurance industry.
Amit Chhabra, business head of health insurance, PolicyBaazar recently stated the following.
A 30% — 40% rise in enquiries is undeniably a positive ticker for the insurance industry in India which can expect people to act in caution and purchase health insurance and life insurance policies in the weeks to come.
But, let’s take a look first at the global economic scenario before delving into the role of health insurance policies in this pandemic situation.
2. Stock Market Crash 2020
31st December was the beginning of the stock market ordeal when news of a novel coronavirus spread across global media. Back then, China was the only country affected by Covid-19, but speculations of the coronavirus disease taking a global face rounded the corners.
Soon, it caused panic among investors when the other countries tested positive for Covid-19 and were nearing a pandemic-state. They believed this pandemic would arrest economic growth, and national governments would be incapable of injecting sufficient money for its revival with a proper stimulus package.
Even though these events were sporadic, it was foreboding of the times to come. 20th March marked the first of many quakes felt by stock markets across the globe.
Tensions concerning the onslaught of Covid-19 were mounting alarmingly. People were raving about the awful times to come, and this crescendoed on 27th February. On that date, the Asia-Pacific and European markets witnessed the worst falls since 2008. The Dow Jones Industrial Average, S&P 500 Index, and NASDAQ-100 all recorded their steepest declines since 2008.
The situation was exacerbated by the Russia-Saudi crude oil price war. On 9th March, the Dow Jones industrial average experienced plummeted by about 2000 points prompting several circuit breakers during the day. It was the worst fall in the history of Dow Jones Industrial Average.
9th March is now colloquially called the Black Monday of Stock Market Crash 2020. 12th March delivered the most significant blow to global stock markets. The BSE Sensex plunged by 2919 points, and the broader Nifty dropped by 868.25%. This came as a product of the announcement by WHO on 11th March, when it classified Covid-19 as a pandemic. It threw the global order into disarray; investors were scared out of their wits and wanted out of their stocks. 16th March was another such fate with dismal levels of point-falls.
On a more personal level, the economic impact of Covid-19 has folded many individuals. For instance, on 27th March German Finance Minister, Thomas Schaefer, committed suicide. German officials like Volker Bouffier, state premier of Hesse, believed that he killed himself under stress from the economic duress caused by the coronavirus disease.
The economy is on a fast-ticking time bomb, with the threat of Covid-19 burgeoning every passing week. The aviation and hospitality industry is facing its worst crisis with international travel bans being the measure of the hour, observed by nearly all countries in the world.
In India, the 21-day lockdown has led to scores of businesses either halting their operations or asking employees to work from home. The industries that remain unscathed at this point are finance, food, healthcare, pharmacy, and media.
The general insurance industry at large has suffered losses since the onset of the coronavirus disease. However, three particular variants — health insurance policies, life insurance policies, and business insurance policies — have shown positive indications.
3. Insurance Industry in the time of Covid-19
· State of insurance industry globally
At this juncture, insurance companies are more crucial and relevant to society than ever. The pandemic that has caused epochal scales of health and economic crisis in the world is a call for insurance companies to come forward and assure its customers that it stands by them.
While in countries like UK, Italy, Spain, and the USA, insurance companies are facing a double blow due to a steep rise in payouts and sharp losses in investments.
As the fear of recession looms on account of government inaction or inability to contain the spread of the coronavirus, investments are going bad. When that situation is coupled with an alarming upsurge in claims, one can only imagine the ordeal for insurance companies abroad.
However, in India, the situation of payouts is not that bad yet as is not the number of cases. In fact, insurers here have an advantage over the global insurance companies — the population here is already abreast of the pandemic without facing its severity yet.
Therefore, consumers will scramble to purchase health insurance policies to mitigate their losses just in case they fall victim to Covid-19. And instances of this scare purchase are already surfacing.
· Recent data on growth for Indian insurance companies
Digital insurance provider Go Digit recently recorded a 50 % rise in the sale of its comprehensive health insurance policy in March compared to January. Recently, it rolled out a new product — coronavirus insurance. It saw a phenomenal response where in less than a month it logged Rs.39 lakh as total premium from the sale of the product. Since it was reaching the 50 lakh-limit set by IRDAI, it had to retract the product.
Policybazaar came on record to state that there has been a 35% — 40% rise in health insurance policies in its platform, whereas life insurance policies grew by 20%.
Therefore, now is a good time for insurance companies to champion their industry forward in the economic foray. Remember that society is now more than ever looking for financial assurances in these uncertain and heady times. However, these statistics are not enough to observe optimism and expect good things to happen naturally.
Insurance companies need to put in proper work and strategies to deal with this situation.
· How insurance companies can boom
So, how can insurance companies ascertain they can withstand this crisis?
1. Improved communications
This shall be exercisable both internally and externally.
Insurance companies need to define their stand to the customers and show how they can respond to these desperate conditions. How they react will have long-term implications on their reputation and shape the way they are viewed by customers in terms of reliance.
Also, as most work is now done remotely, it is imperative to ensure necessary employee outreach. Therefore, insurance companies must project an image that is reliant, firm, and compassionate through effective communication with customers and employees.
Insurance companies need to readily address the concerns of their customers and not neglect them at this juncture. They need to demonstrate their speed, flexibility, and decisiveness to garner and fortify customer loyalty that will well go on into the future.
2. Remodel existing infrastructure
This is on a need-to basis. If insurance companies already have a definitive infrastructure that can address the situation adequately, then there is nothing to worry. However, if companies find their infrastructure incompatible with the current crisis, there is a cause to worry and a need to scramble to make amendments to the same.
For instance, companies who predominantly operate digitally are compatible with the situations, but insurers primarily functioning through agents will find it difficult to cope. For instance, Star Health and Allied Insurance’s policy sales have dipped by 50% in March compared to last year due to this lockdown situation.
Also, companies should provide room to its employees to adapt to working remotely and hold online training sessions for the same. This would ensure their workforces are in-line with the current situation and can deliver well to the customers.
Even though initially there will be a drop in productivity, it’d eventually pick up through practical training and proper support.
3. Aggressive marketing
Marketing is the call of the hour for insurance companies. Their digital marketing campaigns at this point would decide their profits going into the future. The market is fearful of the uncertain times to come, and insurers need to utilise this opportunity to raise awareness about their products among consumers.
4. Coronavirus insurance
Even though IRDAI has mentioned that all health insurance policies will cover hospitalisation expenses for Covid-19, a specific product would garner more attention and sales. This is evident from Digit’s sales figures for their coronavirus insurance policy.
A coronavirus insurance policy is the talk of the town; especially amid rising tensions concerning the alarming number of confirmed cases in India that has crossed the 1000-mark as on 31st March.
Also, the coronavirus insurance ensures inclusivity for those who already hold health insurance policies but have exhausted their limit on some other ailment. They can make use of a separate policy to secure financial assistance.
There is a massive room for this product in the market currently, especially given the unpredictability of this pandemic situation and where it is heading.
Adequately capitalising on these factors would ensure that insurance companies emerge as the next big thing during this Covid-19 scare that has plagued the entire world and its relevant social and economic structures.
