As the coronavirus (COVID-19) pandemic spreads around the world, the health crisis and subsequent restrictions imposed to tackle the crisis are significantly disrupting travel, business operations and supply chains. Individuals and businesses face important costs and losses prompting questions around available insurance coverage and the need for policy intervention in the future. Insurance is an important financial tools for when extreme events such as disasters occur, making available financial protection for populations that may otherwise be economically exposed.
The OECD has released an initial assessment of coverage and gaps in relation to the costs and losses related to the pandemic, an important element in understanding the scope of available insurance protection. The diagram below summarises relevant policies’ coverage.
Generally speaking, households are well covered for losses relating to loss of life, health costs and medical bills during travel, while the coverage for trip cancellation is uncertain.
Coverage for business, by comparison, is minimal. Business interruption insurance covers business interruption caused by physical damage, which have been confirmed by many national insurance associations, including in Australia, Germany and the United Kingdom.
This would mean physical damage on insured premises; or a proximate property if that damage results in closure or inaccessibility of insured premises. However, many commercial policies include specific exclusions for viruses – a legacy from the SARS outbreak. Those business interruption policies that do specifically extend to disease often have an affirmative list – that is, they would not cover new diseases including the coronavirus of COVID-19.
In the short term, government involvement will be required to address the protection gaps described and ensure that the financial burden of COVID-19 is shared more broadly.
Discussions should be held with insurers on the scope of interpreting policy terms more flexibly to support coverage. However, a broad expansion of the scope of insurance coverage could have implications for insurance companies’ ability to meet their regulatory and contractual obligations.
In the longer term, coverage related to epidemics and pandemics may need to be improved to ensure that individuawls and businesses get the coverage they need in the future.
In the longer term, governments should consider public-private partnerships to support the insurability of pandemic risk, particularly if the level of risk increases in the future.
Find out more about OECD work on insurance at www.oecd.org/finance/insurance
The OECD is compiling data, information, analysis and recommendations regarding the health, economic, financial and societal challenges posed by the impact of Coronavirus (COVID-19). Please visit our dedicated page for a full suite of coronavirus-related information – www.oecd.org/coronavirus.