FACULTY OF BUSINESS AND MANAGEMENT

LIFE AND HEALTH INSURANCE (INS535)

BA241 3A
SEMESTER 3, 2020/2021

INDIVIDUAL ASSIGNMENT 1

LECTURER:

MADAM UNGKU MUNIRAH BINTI UNGKU ABDUL AZIZ

MADE BY:

RIENAH BINTI SANARI (2019231122)

TABLE OF CONTENT

Case study 1

Identifying the factors and forces that affect 2

the life and health insurance during the
pandemic covid-19.
Determine the pandemic covid-19 impact 3
on the life and health insurance company.
Describe the responds by the life insurance 4
company.
 Conclusion and recommendations. 5

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 1) CASE STUDY

2) IDENTIFYING THE FACTORS AND FORCES THAT AFFECT THE LIFE

AND HEALTH INSURANCE DURING THE PANDEMIC COVID-19.

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 With COVID-19’s significant impact on economic activity and employment levels at a
local, regional and global level, consumer spending power has reduced significantly over a
short period. Insurers are responding with payment breaks in an effort to stem a potential
large level of lapses.

Coupled with the reduction in consumer spending power is the impact of market volatility
and general uncertainty on consumer confidence and, therefore, on willingness to spend. Life
assurers expect this to translate into significantly lower new business volumes for a period of
uncertain duration.

In addition to the expectation of lower new business volumes coupled with increased
lapses, there has been a significant drop in market values and interest rates. The impact of
this on life assurer income levels in some cases is leading to financial strain and the need to
consider unpalatable actions such as expense cuts.

Although the tragic loss of life will reverberate across society, from an insurance
perspective life assurers may not see a large volume of life claims as many of those that
succumbed to the disease were of the age cohort that may not have coverage. However, there
is a risk that mortality for other cohorts may increase arising from fear of seeking hospital or
medical care or the general stress of self-isolation.

3) DETERMINE THE PANDEMIC COVID-19 IMPACT ON THE LIFE AND

HEALTH INSURANCE COMPANY

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 Customer behaviour and impact on operations, including intermediaries which is
Certain customer channels have been materially impacted or curtailed due to government
policy and strategies to reduce community infection.
Nature of COVID-19 and its impact on insurable activity. The nature of the pandemic
means that certain governmental and societal decisions have limited certain key insurable
activities. Motor and travel insurance (personal and business) have seen significant reductions
due to the travel restrictions and reduced economic activity. More recently, the suspension of
construction projects has led to a reduction in construction insurance, and restrictions on
communal events have led to a similar reduction in events insurance. To date, other lines of
business in General Insurance (such as home and property) seem to be holding up. In the
health business, the restrictions have meant that elective procedures and consultations have
been greatly curtailed and subsequently claim volumes have reduced in the short term. Life
assurers are impacted from an insurable activity perspective in terms of their exposure to
rising unemployment across the economy leading to reduced workforces and the associated
financial strain; the lack of hiring new employees thus limiting new business; the impact
market volatility has on consumer buying confidence; and the impact of limited activity in
certain sectors (e.g., new mortgages ).
The impact of COVID-19 on insurers’ profitability will focus them on expenses and
the wider cost agenda. As insurers’ profitability and cash flows are being materially
impacted, there has already been a re-focus on the insurers’ expenses and the wider cost
agenda. This will re-focus the insurers on the cost transformation agenda, including (not
exhaustive):-Short-term staff salary and benefit decisions and sourcing blend. Contractor
costs across the enterprise. Location and service delivery models (in the context of relative
success to date of remote working), digitalisation, cloud and automation agenda and Third-
party provider spend, supplier management and associated supply chain risks. Indications are
that, similar to most financial institutions, most insurers are resisting (in the short term) the
potential impulse to cut jobs, as the respective governments and society would react
negatively at such a sensitive time.
Customer perception of Insurance –a lingering impact. There may be medium-to-long
term implications of customers’ perception of and ‘use’ of insurance. With the level of
insurable activity materially down, customer perception and expectations may shift in the
medium-to-long term such as customers questioning having insurance while their car or

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commercial van is unused for a longer period of time . This is expected to accelerate the

.
demand for ‘pay per use’ and other models of insurance Other implications of COVID-19
include the changing nature of the workplace, and workplace liability may start changing due

to the levels of remote work and how this continues after the pandemic . There are
indications in certain markets that the perception is that insurers are avoiding paying valid
business continuity claims using detailed terms and conditions to avoid acceptance and
payment of claims.
Financial and cyber crime. Companies globally have experienced an increased level
of criminal activity impacting the companies and their customers. There have been a number
of scams perpetrated. Types of scam include imposter scams, COVID-19 payment support
scams, investment scams and product scams. In this environment, insurers have had to
increase their cyber fraud prevention and monitoring activities including updating and
improving controls.

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 4) DESCRIBE THE RESPONDS BY THE LIFE INSURANCE COMPANY

Customer behaviour and impact on operations, including intermediaries . In most

countries, face-to-face interaction has effectively ceased, with many customers now using
digital channels (although in some countries financial services are deemed ‘essential’ and
offices and branches remain open). On the whole, customers are being re-directed to digital
channels for information, service and queries, where possible . Intermediaries, agents and
financial advisors face many of the same practical challenges. Indications are that those
insurers who have already invested in their digital capabilities (retail and intermediary) have
been in a better position responding to communications, servicing and new business
activities. Bancassurance channel customer interaction has been significantly diminished,
while insurers that have branches are effectively closed (with staff redeployed to other
priority support activities). Indications are that corporate insurance interaction remains
relatively stable (as compared to personal lines business). While insurance communications
are traditionally paper-heavy, communications are now being adapted to reflect the fact that
postal systems are impacted. Contact centre capability to meet demand from a technology and
remote-access perspective has been challenging .Insurers have had to realign resources across
the organisation to adapt to changes in customer interactions
Nature of COVID-19 and its impact on insurable activity. Need to monitor and review
their portfolio and operationally re-align resources to the lines of business that require
increased customer support and attention. Significant attention will be required by insurers to
assist their customers and intermediaries in ‘kick-starting’ their businesses as restrictions are
relaxed. Additional advice and supports to customers should be considered to protect their
property (specifically sites) during the lockdown.
The impact of COVID-19 on insurers’ profitability will focus them on expenses and
the wider cost agenda. Insurers need to review their portfolio of projects and reprioritise in
light of the pandemic and liquidity considerations. Assess robotic automation and AI
opportunities, focusing on certain labour-intensive manual processes. Broader operational
excellence initiatives (to reduce waste and generally make processes more efficient and
secure) should be considered.
Customer perception of Insurance –a lingering impact. Insurers need to assess the
medium-to-long term implications of this pandemic on customer needs and demands. Insurers
must be proactive in recognising the challenges by policy holders and intermediaries and

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offering solutions to support them, e.g. by providing additional financial advice or virtual
health services. This should be done both at an insurer level and at an industry level within
each market (via insurance industry advocacy groups). Insurers should seek to partner with
stakeholders to bring forward creative solutions to the crisis. Customer-centric and flexible
product solutions are expected to accelerate once the pandemic passes.
Financial and cyber crime. Insurers immediately need to ensure cyber protocols and
controls are updated and closely monitored. Third-party testing of cyber controls may be
required to give an appropriate level of independent assurance.

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 5)  CONCLUSION AND RECOMMENDATIONS

CONCLUSION
In conclusion, the COVID-19 pandemic has posed a sudden and unexpected shock to
the insurance industry. The impact on general insurers will vary depending on the products
and types of coverage offered by the insurers. The pandemic has taken a toll on new
premiums on certain lines of business, such as travel, events, and trade credit insurance, and
losses from these lines of business may become significant. Other lines of business such as
motor and home have remained relatively stable.
From an investment perspective, the volatility in financial markets has not yet had a
pronounced impact on GI insurers, in particular with government bonds having been
relatively unaffected by the crisis.
Operationally, L&P insurers, similar to GI companies, have managed well with the
initial crisis. However, with self-isolation rules in place, digital capability is becoming
increasing important due to the nature of L&P products and dependency on agents and other
intermediaries.
RECOMMENDATIONS

Insurers need to ensure that the governance and controls are in place to manage key
business risks and that they meet their obligations. Despite the speed of events, insurer
management need to track and evidence key decisions and update the boards and committees
appropriately. Regular updates with the regulatory authorities is recommended. Governance
and oversight controls to be documented and implemented to provide a clear audit trail and
rationale to support the COVID-19 initiative decision-making process.
Next, any approved initiatives should be subjected to ongoing (and in some cases
enhanced) governance and oversight, in order to ensure that they are implemented in line
with approved design principles, that they continue to operate in accordance with the best
interest of customers and regulatory expectations, and that, where appropriate, any decisions
to cease an initiative is also accompanied with a formal governance process. Consideration
whether ‘essential services’ that have been identified for staff continuing to work on site have
been signed off and risk-accepted.

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