Various classes such as travel insurance, personal accident and workers’ compensation will be affected directly and indirectly by the worsening coronavirus outbreak in Australia, actuarial firm Finity says.

Exclusions for pandemics and epidemics will be important in deciding “whether and how policies will respond”, Finity Principal Estelle Pearson says.

But she adds it is still likely that the industry will be caught up by the fallout from the COVID-19 respiratory illness pandemic.

For travel insurance, the date of policy issue will be critical, considering that travel warnings have escalated since January 20.

“Consideration may also need to be given to whether exclusions meet “community standards” if they will result in large numbers of declined claims, especially if the wording is at all vague,” Ms Pearson says in an article posted today on the Actuaries Institute website.

For workers’ compensation, direct impacts could come in the form of liability claims arising from a perceived breach of duty of care in relation to visitors, contractors or those under care, especially in the healthcare, aged care and disability sectors.

“From a workers’ compensation perspective, the healthcare and other frontline sectors are likely to be more exposed to employment-related COVID-19 infections leading to time off work,” she says.

“Other high people-contact sectors like retail and cafes/restaurants might also be expected to have higher than average exposures.”

Indirect impacts relate to changes in claims costs arising from changed business conditions caused by the coronavirus outbreak. An example would be the disruptions to supply chains, which are already happening globally as factories shut down indefinitely.

Ms Pearson says there will also be economic impacts where claims costs affect a number of lines. The lines most likely to be impacted are directors’ and officers’ and professional indemnity, with claims likely to increase from business and investment scheme failures.

Mortgage insurance is also expected to be affected if the pandemic leads to a prolonged economic slump, forcing businesses to lay off workers.

“It is impossible to estimate the impact of COVID-19 on insurance claims costs with any level of certainty,” Ms Pearson says. “The response in Australia and globally continues to evolve.

“Overall, the general insurance industry will not be one of the most heavily impacted sectors. However, the impacts are not necessarily immaterial and careful thought is required to enable insurers to get a handle on the potential implications.”

She says the situation has revealed a “classic ‘how to measure anything’ problem”, and actuaries can help establish some boundaries around this measurement by building models based on exposure and impact scenarios.

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