The FINANCIAL – Because of the coronavirus outbreak there is a sharp increase in travel insurance sales across the industry. Some companies are stopping to sell travel insurance. The coronavirus outbreak is likely to have a bigger effect on the world economy than the outbreak of Severe Acute Respiratory Syndrome (SARS).
Having initially brushed off the potential impact from coronavirus-linked claims, global insurers are waking up to the prospect of a double whammy – a sharp rise in payouts at a time of big investment losses. Because epidemics are excluded from many business insurance policies, the early prognosis was for a low levels of claims. But as recession threatens the global economy along with rising insolvencies, all sorts of companies with trade credit insurance, from airlines to retailers, are coming under strain, according to Reuters.
Holidaymakers are anxious to protect themselves against having to cancel trips or being stuck overseas, so there has been a sharp increase in travel insurance sales across the industry. LV=, which used to be known as Liverpool Victoria, has more than 5 million policyholders, mostly with home or motor cover. The company said it had seen a doubling in the number of policies sold over the last couple of weeks, as travellers rush to protect themselves. The company said, “In light of the impact that Coronavirus (COVID-19) is having globally, we’ve made the difficult decision to pause the sale of travel insurance to new customers,” BBC reported.
“We remain committed to the travel insurance market and this is only a temporary move given the exceptional circumstances. We will continue to monitor the situation closely,” is said in company’s statement.
Customers with insurance already in place will continue to be covered, however the provider has put a stop to new policies until further notice. It comes after several travel insurers warned they could have to update – and limit – their policies to help cope with the ongoing crisis – which has led to hundreds of flight cancellations worldwide.”We considered a number of different options, such as excluding cover or significantly increasing prices for new customers but we strongly believe this temporary measure of pausing the sale of new policies and focusing on our existing customers is the right decision,” LV= said. “There is no change for existing customers who already have a policy with us. They can contact us in the normal way if they need to make a claim, and we are also still offering renewals to our existing customers so they can continue to be insured with us,” company added according to Mirror.
Also, one of the UK’s biggest insurers has cut back on the cover available in new travel insurance policies because of the coronavirus outbreak. Aviva says that people will still be able to buy its travel insurance – but they will not be able to add cover for travel disruption. A spokesperson said: “We have decided to adjust our cover to reflect the current risks posed by coronavirus.” The news comes as airlines cancel thousands of flights worldwide. Aviva customers who bought travel insurance before Monday still have the full level of cover. But if the UK Foreign Office advises against travelling to further countries, a new Aviva policyholder would now not be able put in a claim under the travel disruption clause, BBC wrote.
Insurers’ investments are coming under pressure. They manage more than $20 trillion in assets globally but their big government bond holdings are becoming problematic as the threat of recession grows and central banks’ interest rate cuts have sent yields plunging. The $11 billion trade credit insurance market covers the risk that a company’s customers cannot pay for goods or services bought on credit. There was already a rising trend in 2019 in big corporate insolvencies, according to figures from insurer Euler Hermes at the end of the year. The coronavirus outbreak is likely to have a bigger effect on the world economy than the outbreak of Severe Acute Respiratory Syndrome (SARS) some 20 years ago, European Central Bank governing council member Klaas Knot said last month, adding that SARS wiped $40 billion off world equity markets, according to Yahoo Finance.