EFFECT OF COVID 19 ON INSURANCE UNDERWRITING

• August 11, 2021
• LUTAKOME
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The recent stories of skyrocketing medical bills, loss of lives due to the second wave of covid 19 pandemic in Uganda may not have told the full story; its sadly true that adults above the age of 20 are suffering from the pandemic but many children and adolescents are equally being affected due to the pandemic effects on key benefactors which leads to shattered dreams.
Just like several sectors, the insurance industry continues to suffer the effects of the pandemic primarily because of the challenges to social physical interaction, insurance relies a lot on an intimate connection between the advisor and the prospective customer, other factors hitting the industry include but not limited to drop in household income leading to non-renewals and lapses, skyrocketing claim numbers.
Below are several factors any underwriter needs to put into consideration to adapt with the current environment
Occupational Hazards: the nature of occupation affects several classes of insurance such as workers compensation, group personal accident, group life assurance, credit life insurance, professional & public liability. The emergency of covid 19 has created the need for an underwriter to challenge the traditional risk classes for occupational hazards. A prudent underwriter must watch with interest the frontline workers in the medical field, aviation, supermarket, hospitality, tourism, and any related business where the nature of work cannot be executed without physical interaction. These have proved as exposed to a similar degree as the traditionally dreaded occupations such as heavy manufacturing, mining, etc.
Motor Insurance: the new work from home culture in a bid to curb physical activity has reduced the use of private vehicles which as a plus to the environment has potential to disrupt the motor industry class of insurance if underwriters do not come up with short term rates where motorists purchase insurance on an ‘insure per trip’ basis as opposed to the current annual subscription practice. For an underwriter to be effective at this, several changes have to be made to the traditional underwriting practice such as investment in technology platforms that can leverage data in areas of driver’s behavior and mileage covered per month in order to equitably rate the premium as well as hastening claim settlement.
Many car owners feel ripped off paying annual premium, yet they have to go through realities like vehicle grounding for an average period of 60 days a year during which the risks of accidental damage and theft are at their lowest point.

Vaccination certificates: with the spike in morbidity and mortality rates among the insuring population, a prudent insurer needs to consider vaccination certificates to applicants to the list of onboarding requirements with incentives such as premium discounts for those with vaccination certificates. Contrary to the traditional approach where insurance applicants for Life & Health insurance are subjected to medical examinations, simple disclosure statements plus evidence of vaccination are likely to be the norm going forward.
Fraud Management: Underwriters now more than ever have to be on the watch for fraud, for business insurance examining the governance structure of the organisations because the natural reaction for some wrong people is to lodge fraudulent claims when business is not going well. To save the claims people from doing a lot of work, underwriters can save the day by profiling customers to minimize exposure to fraud.
Credit Related Risk: these affects several classes of insurance such as property cover, credit life, mortgage protection cover and underwriters have to take a keen interest in the target clientele of their lending partners, for example a lending institution specializing in the SME sector is more likely to be prone to increased fraud exposure in for areas of fraud, fire damage due to the low levels of governance within this structure, whereas a lending institution whose portfolio is concentrated in unsecured lending to the private sector is prone to job loss risk leading to delinquency; on the other hand a lending institution concentrating on lending to the public service, or health sector employees is not likely to be affected by job loss risk.