Life lessons

Liz Booth examines life and health insurance protection available in light of the coronavirus pandemic

The consequences of the Covid-19 pandemic, particularly for the life and health insurance sectors, are still unknown and as Laura Hay, global head of insurance at KPMG, says: “The impact on health insurance is hard to determine at a global level because the impacts will be very different country by country.”

However, she believes the crisis may have a number of longer-term and more positive effects on the sector.

Firstly, as the pressure on health services increases there is likely to be greater use of telehealth services, helping healthcare reach more remote and less affluent parts of the populations including the underinsured or uninsured.

Secondly, Ms Hay notes: “In the wake of the SARS epidemic, for example, we saw a temporary spike in critical illness policy sales in Asia. We may see a similar phenomenon post-coronavirus, with rising sales of health insurance, critical illness and even life cover across the world.”  

Making a claim

Claim notifications are only just beginning to arrive but, for those with a life insurance claim, broker Cavendish Online says: “Claims against existing plans should not be impacted at all as the underwriting at the time of placing the policy would not have known of this coming risk. Coronavirus claims will be made against the terms and conditions of the existing plan and the usual claims terms. We do not know of any plans that have contained exclusions in relation to pandemics or the contraction of a virus in a foreign country.”

On income protection policy claims, the insurer would usually get written confirmation from a GP that the client is unable to work due to accident or illness. Insurers are working hard on alternatives to pay such claims quickly, says the broker.  

Maintaining cover

In a world where private health hospitals are handing over their space to the NHS, some are questioning the value of policies. However, the Association of British Insurers has been reminding clients:

• Health insurance provides a range of benefits, which can continue to be accessed including virtual and telephone (24hr) contact with GPs and consultants, as well as specialist help for physiotherapy or mental health matters.
• Cancer care for customers is crucial and insurers and private hospitals are working to ensure minimal impact on services.
• Insurers are ensuring that deferred treatments remain authorised so they can be accessed as swiftly as possible when services return.
• If customers are hospitalised with Covid-19, they will be treated through the public health system. With no private health option, some insurers are offering a cash benefit to customers. Ian Sawyer, commercial director at life and health insurance intermediary Assured Futures, lists the arguments that advisers can use to persuade clients against cancelling policies:  

Private medical insurance

• Health/medical insurance excludes conditions before the client first bought the policy, so on a five-year old policy, any condition prior to five years is excluded but any condition since then is covered.
• Those with health insurance are still at risk from becoming ill, aside from the virus; if an individual keeps their cover and develops cancer, an unknown lump or even a sore joint, their policy will continue to help.
• Other positives include NHS cash benefits if a client is admitted to hospital, virtual GP appointments, digital physiotherapy and even mental health support.
• When this pandemic is over, there is no doubt the NHS will take some time to recover, meaning that non-essential operations will continue to be delayed.
• Insurers are looking at ways of helping their customers – reducing cover, increasing excess, changing plan types and even offering payment holidays – such changes can be implemented midterm and policies can be changed back when required.  

Income protection insurance

• Clients remain at risk of being involved in an accident or developing a separate illness, so there is still a need to keep the income protection (IP) policy on risk.
• Many policies go hand in hand with mortgages, so those thinking of cancelling their policy should be extremely wary.
• Those who have an IP policy in place with a guaranteed premium amount should be aware that they are unlikely to ever find a price that low in the future.
• Those with unemployment insurance must keep this cover at all costs as this type of insurance is no longer available.
• Some IP policies also come with a plethora of benefits such as digital GPs and health MOTs, so customers may not be aware of exactly what they are cancelling.  

Life insurance

• As we age, life insurance premiums become more expensive, so keeping an existing policy will protect a currently low premium.
• Life insurance will ensure that a policyholder’s family will receive a lump sum that can help pay off the mortgage, cover funeral expenses or support them during a time of financial need.
• Policyholders are covered should they pass away due to the Covid-19 virus.  

Accident, sickness and unemployment cover  

• Unemployment cover is currently unavailable on the market, so anyone with this should not be cancelling.
• Those with a longstanding redundancy should avoid cancellation at the present time.
• Many employers will face some financial struggle.
• The younger a client is when they purchase cover, the better.  

Over-50s cover

• f those with over-50s cover decide to cancel a policy, they will lose their agreement and all premiums paid so far.
• It could help with funeral costs or to leave some money to a loved one.
• As a client ages, the monthly cover costs will rise, so keeping a policy in place will protect a monthly premium.
• These plans ask no medical questions, meaning a client will be covered should they pass away due to coronavirus.
• Policies can come with added benefits such as digital GPs, counselling and bereavement support services.

Liz Booth is contributing editor at the PFS