Covid-19 was a game changer for the financial services world.
Advisers had to adapt their offering to digital from face-to-face communication in a matter of days, while lawyers had to deal with e-signature and video declarations for Wills and trusts.
Another sector which couldn’t afford to stand still was life insurance; as some of the unfortunate casualties of the pandemic would have had some form of cover or protection.
International Adviser spoke to several firms in the life insurance industry to discuss the sector post-coronavirus.
Fit the policy
Covid-19 was a fundamentally “new” illness; which begs the question, was it included in existing policies?
Derek Lyon, RL360 underwriting and claims manager, said: “Covid-19 wasn’t an excluded reason because it wasn’t a known problem. Our policies do not have pandemic exclusions.
“However, because so many people experience mild symptoms, or are asymptomatic; then, on its own, covid-19 would be unlikely to give rise to a valid critical illness claim, unless a further definition was met.
“Policies that include hospital care in addition to critical illness are almost certain to be covered for the more seriously-ill client.”
Charlotte Nixon, proposition director for Quilter Financial Planning, said: “For life insurance policies, while covid wouldn’t have been specifically stated, as it’s a new disease, they still would have covered it if someone was to pass away from the virus.
“Similarly, someone with an income protection policy would still be covered if they had a note from a doctor declaring that they were medically unfit to work due to the virus.
“Critical illness polices do not cover covid itself, although if the virus contributes to someone developing a condition which is covered by the policy, such as kidney disease, then it would pay out.”
As coronavirus claims have taken up a lot of time and effort recently, have life insurers changed their policies?
Simon Jacobs, head of underwriting and claims at Aegon, said: “Existing life insurance policies remain unchanged following covid-19. The pandemic hasn’t caused Aegon to change the terms and conditions of any of its protection policies.
“The underwriting approach for new Aegon life insurance policies has been adapted to take into consideration the impact of covid-19.”
Peter Hamilton, Zurich’s head of retail protection for the UK, added: “Our own products haven’t changed. Should a customer die from covid-19, or anything else, he or she will be covered.
“There have been some changes to the way policies are underwritten, reflecting new and different risks, but for the vast majority of new customers applying for Zurich cover, around 98% of applicants, nothing has changed and they can still get this immediately.
“For less than 2%, we have postponed cover because they tested positive or displayed symptoms, though they should be able to get cover after a short waiting period.”
It would be easy to assume that the outbreak has forced more people to think about insurance.
But, has this been the case?
Craig Paterson, interim chief underwriter at Royal London, said: “We saw an increase in enquiries and new business applications across all age groups in March but this has stabilised since then.”
Hamilton added: “There are a number of factors that create a positive environment for protection business, customers are seeing the very real impact of the virus on people around them, causing them to reflect on their mortality or lack of resilience to income shocks.
“Some will be prompted for the first time to think about protection products, others might now have had enough of a nudge to move from interest to action. Insurers have mobilised at pace to keep ‘open for business’ and many advisers have transitioned well to remote working.”
It can be more difficult and expensive for ‘at risk’ groups to obtain life or critical illness cover, usually because of underlying health conditions.
But what about NHS staff and other ‘key workers’ who have been on the frontline?
Does their proximity to the virus mean protection is less accessible for them now?
Quilter’s Nixon said: “At present, there is no guidance from providers to say that they are less likely to provide cover to workers in specific sectors.
“However, providers are being much more restrictive on who they give cover to depending on their health and medical condition.
“People that pre-pandemic would likely have easily passed through the underwriting process are now being declined or are being asked to defer cover. This includes people who are older, have a high body mass index or have conditions such as diabetes.
“Most of the providers say that their underwriting processes post-pandemic are now under constant review, however, they are unlikely to ease their criteria until there is an effective vaccine.”
Future of the sector
The pandemic has forced many sectors to change their offering and way of working.
What has the outbreak done for the future of the life sector?
RL360’s Lyon added: “Life insurance is a long-term business and the effects of the pandemic are not yet truly known.
“The prudent insurer offsets risk via the reinsurance market, and selects risk through initial underwriting.
“Regular inability to obtain medicals could see a push to increase non-medical limits, but the downside could be slower claims processing if any disclosure issues arise.”