The ongoing pandemic might cause a massive increase in insurance premium rates up to 6%, according to the Society of Actuaries fellows Greg Fann and Dave Dillon.
The increase is a normal rate bump for the American insurance market but the pandemic will create a ‘messy’ factor in the medical and life global insurance market. Rising unemployment rates and businesses going bankrupt are major factors that will dampen the growth of the sector.
While experts believe it is still too early to predict the impact of the pandemic on the insurance costs, having foresight is integral in making the next move for insurers. Be it a need for more comprehensive and COVID-19-central coverage or an affordable medical solution for the virus.
“Any rate shifts must be based on expected costs, and can’t include past losses in protective premium rates if these costs aren’t expected to persist into the next play year,” said the fellows.
With the absence of a vaccine and a wider spread of the disease, experts believe the pandemic could persist into 2021. The World Health Organization even confirmed that the flu virus would stay with mankind for years to come, even with a vaccine.
Meanwhile, there are also changes in the insurance market, which include coverage on testing for patients and financial losses. Additionally, there has been reduced spending on medical treatments of policyholders.
“While there have been more hospitalizations and higher spending, the early indication is that many insurers are also seeing reduced spending in other areas, such as elective surgeries,” said Actuaries fellow.
Some hospitals are also implementing a delay in elective medical treatments for capacity reasons in facilities. Social distancing is also considered now that many people are going in for flu virus treatment.