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Are we going to pay higher health insurance premiums as COVID-19 drags on? Image Credit: Shutterstock

Dubai: Long-term health consequences of COVID-19 may not be fully understood, but global life insurers have been taking steps to curb payouts to stem a fallout from the pandemic. But does this also mean people will have to pay higher insurance premiums in the months and years to come?

Although acute COVID-19 illness typically lasts two to six weeks, researchers worldwide have indicated that some patients have reported chronic symptoms persisting for weeks or months after the acute illness has ended. Affected patients are referred to as ‘COVID-19 long-haulers’ or ‘Long COVID’ sufferers.

Scale of ‘Long COVID’ unclear, but insurers prepare

While the scale of Long COVID is still unclear, the insurance industry has started to prepare for it.

“The insurance industry is generally well prepared for major loss events, including pandemics, but the financial impacts will take time to play out,” explained Neal Baumann, global insurance leader at international auditing giant Deloitte, in an analyst research note.

“Insurers are responding to the widening COVID-19 outbreak on multiple fronts as claims, payers, employers and investment managers,” Baumann further noted, while adding that each has its own challenges.

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Scale of ‘Long COVID’ unclear, but insurers prepare

Long-term insurance impact of COVID will take time

The impact of COVID-19 will take time to reflect on insurers’ books but analysts evaluate that it could lead to a hardening of policy rates as well as changes in terms and conditions, leading to higher premiums and reduced payouts. Insurance areas particularly affected are health, life and income protection schemes.

Global insurers, like UK-based Prudential, Aviva and LV=, have been imposing waiting periods before COVID-19 patients, including those who have recovered, can apply for coverage, Reuters news agency reported recently, while further revealing that some are also limiting coverage for certain age groups.

“There will be some time-lag for insurance claims to be notified to insurers, assessed, and paid,” Baumann added. “Insurers have commenced the process of evaluating their claims reserves in light of the current circumstances and it is expected that this will be on-going as fact patterns emerge.

“Falling equity markets and interest rates could put pressure on insurers’ balance sheets, life insurance product profitability and investment management fees related to savings products.”

How will it impact private health insurance globally?

Standard policy terms and benefits of health Insurance policies allow for conditions or complications from COVID-19 to be assessed for available treatment.

It is not yet clear if and to what extent such policies will cover ‘Long COVID’, because, as the name suggests, such a definition would indicate a ‘chronic medical condition’, which leads it to fall under an entirely different insurance category.

Standard insurers' terms do not include cover for chronic conditions unless specifically included as part of the plan design, thus coverage may only be available where the chronic issue has an acute flare up.

The longer term implications are still being analysed and assessed by insurers worldwide in both the potential impact on the terms and benefits (additional exclusions, introduction of benefits etc) they wish to make available as well as the cost of providing the cover.

Potential delays in seeking treatment are concerning for both the individual and for the healthcare providers. Should diagnosis occur at a later stage, treatment tends to be longer, potentially more intrusive and more expensive to administer. Long-term recovery could also be affected by such delays.

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How has insurance premiums fared in the UAE?

How has insurance premiums fared in the UAE?

Health insurance premiums in the UAE have gone up since the outbreak of the COVID-19 pandemic last year, data shows, with industry analysts forecasting that premiums are expected to go up further this year as well as over the next couple of years.

Medical insurance premiums in the UAE actually increased by 8 per cent last year – which is higher than the growth in inflation, according to US-based industry-wide consultant Alvarez & Marsal. This is over and above the increases in recent years.

Many health and life insurance companies increased premiums on their insurance plans last year by up to 20 per cent. Industry players see a hike in 10 to 15 per cent range in health and life insurance premiums by next quarter.

While existing COVID-19 claims in both health and life insurance sectors can be seen as one-off factors to influence the prices of health and life insurance – where an excessive number of claims have been borne by the insurance company, it has impacted them negatively, earnings reports show.

Insurance premium may continue to increase

Insurance market reports indicate that the premium increase may continue to rise up to 40 per cent for the next two-three years to come.

Much of the COVID-19 related treatment was footed by the local authorities in the UAE, or was heavily subsidised. Plus, with the country focused fully on countering the pandemic, for much of last year, fewer people were turning up at hospitals and clinics for consultation.

This is why health insurers have observed a dip in the frequency of claims during the pandemic due to a reduction in unnecessary use of healthcare facilities.

However, an eight to 10 per cent increase in medical costs has been observed. And those costs can be expected to go up at similar levels going into 2021, multiple UAE-based experts who spoke to Your Money said.

Also, elective surgery and other inpatient procedures were postponed where possible. Against this background, the rise in insurance premiums would come as a big blow to employers, who have to offer compulsory cover for their workforce.

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Insurance market reports indicate that the premium increase may continue to rise up to 40 per cent for the next two-three years to come.

Key takeaway?

As the numbers affected by ‘Long COVID’ are unknown, but potentially significant, there is a possible future impact on the costs of such policies.

Increase in claims and associated costs plus the issue of individuals not seeking treatment for conditions or later than they would have done pre-COVID may result in income protection claims lasting longer and thus having a larger impact. This in turn would push up the cost of providing that cover.

As insurers get to grips with the long-term implications of COVID-19, this may be an opportunity for innovation for those insurers.