The outbreak and transmission of novel coronavirus have brutally shaken and opened up all sectors of the economy and giants. Moreover, it has posed a fundamental question to the whole world. That is, insurance companies must cover the risk and always stand up for the customers. Now insurance companies are trying to create a pool through which financial problems can be dealt with during such epidemic.
The challenge to better protect policyholders
The epidemic has forced insurance companies to think about what else they can do to better protect policyholders? Apart from health indemnity policies covering the treatment expenses of Kovid-19, no insurance product can offer the relief that customers need to withstand this challenging time.
Estimated impact of 26 billion dollars on Indian economy
Crisil’s May 2020 report estimated an impact of $ 26 billion on the Indian economy. This shows how the epidemic has pushed our economy far back. This has affected our imports and exports. Unemployment in our country increased by 26 per cent in April 2020. Most factories, institutions, business establishments, construction sites, etc. had to be closed during the lockdown period, forcing migrant labourers to return to their homes.
What was learned from such emergencies
Additionally, many companies could not withstand the impact of the lockdown. This led to people losing their jobs and still losing. This epidemic has helped us identify problems and flaws that need to be worked on further. Now the question is, what can we learn from such emergencies? Do we have a solution that can help us recover faster from it? Can we compensate financially for the loss of business or income even after losing the job in lockdown? Can there be a way to create a bridge between such individuals, families, businesses, economies and society at large against such epidemics?
The answer is yes. Surely, insurance companies can be better prepared by creating pools now when we face such a situation in the future.
What is the pandemic pool?
Insurance companies can create an emergency program by creating a pool of funds, that is, by raising funds to cover most of the losses due to an epidemic. Let us see how insurance companies can fulfil this idea. Today, no commercial interruption policy, which is bought with the Standard Proper Policy, does not cover the epidemic lockdown and the losses caused by it.
Compulsory add on the cover will be made
Property policies for corporates as well as a compulsory add-on cover can form epidemic cover insurance companies. The cover will begin immediately after the government announces the lockdown due to the epidemic. Under this addon, various standing charges of corporates such as employee salary, campus rent etc. can be covered due to lockdown. This may be the maximum compensation cover for the initial 2-3 months of lockdown.
There will be a means for all kinds of problems
Pay cuts, layoffs, loss of business losses will help companies get a tool to recover from the effects of the epidemic. On a retail basis, individuals can purchase it as an add-on cover along with their home insurance policy. It will not be mandatory and it will be up to a customer whether they opt for it or not. Under this add-on, in case of loss of a job or any special circumstances, the insurance company can pay the monthly EMI to the customer for his home loan for the first 2-3 months.
Funding for this pool can be done through a public-private partnership
The financial burden on an individual can be reduced by taking care of their home loan during the lockdown period. Funding for this pool can be done through public-private partnerships in which both the government and companies can contribute to this pool. It may be considered for all companies to contribute to this pool from CSR components. So they will not need to see it as a separate expense. This way you can make a good pool.
The corporate can help with CSR fund
Corporates can pay premiums for pandemic add-on cover as part of their property policy from their CSR fund. Hence the premium paid for this epidemic cover does not impose any additional burden on the company. Insurance companies may also seek reinsurance support that may be for specific corporate who wish to opt for a longer-term of liability. That is more than 3 months.
The pandemic pool will cover for initial 2-3 months
For example, the epidemic pool may provide cover for the initial 2-3 months of lockdown. General insurance companies can also contribute to this as they do in the case of terrorism / nuclear pools. Once the pool funds are strong enough, the government can gradually reduce its contribution to the pool and shift its focus towards reducing the spread of the pandemic.