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Impact of COVID-19 on Life Insurance Plans Premium

By PolicyBazaar

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The coronavirus pandemic has badly affected people all over the globe. Not only this virus has had a micro-level impact but if had significantly affected the entire world at a macro-level. We all are living in such a difficult time where people might have witnessed curfews earlier but the complete closure of businesses and industries for 50+ days is something that has not been witnessed by the people, till yet in their lifetime.

Economic crises among all industries have been increased because of the nationwide lockdown during coronavirus outbreak.  One such industry that has been experiencing difficult challenges is none other than the life insurance industry.

Now have a look at how coronavirus has left its impact on the life insurance industry.

Impact of COVID-19 on Life Insurance Industry

According to the latest report, the life insurance policy usually deals with term insurance plans, saving plans, investment-linked insurance plans with assured or semi-assured long-term returns. Moreover, there will be an impact across the board, but the reasons will be different for each type of life insurance policy:

Term Insurance Policy

This COVID-19 pandemic has forced many of the people thinking about all the worst-case scenarios that would happen to their loved ones in their absence? How they can protect their loved ones financially? Well, the answer to all these questions is only term insurance. That is why, there is a significant boost in the demand for the term insurance policy since this is a pure life cover that offers the sum assured to the family members in an event of the sudden demise of the policyholder during the tenure of the policy. Since the cash position of many individuals being unstable due to pay-cut, unpaid leave, unemployment, there might be a disinclination to choose higher cover. In addition to this, higher insurance cover requires medical tests which most of the people will be afraid to do considering the current situation. Therefore, a temporary slump in sales activity has been anticipated.

Investment-Linked Insurance Policy

The majority of the people’s confidence in the stock market has been badly affected as there is a crash in the global stock market due to the coronavirus outbreak. Henceforth, only a few savvy buyers who truly believe in purchasing at the bottom will begin new investment-linked insurance policies as of now. However, all those people who are existing customers are suggested to stay put and not try to withdraw prematurely. This will help them to make the most of their investment in the long run.

Long-Term Saving Insurance Policies

Long term saving plans might look attractive but insurance providers will experience some challenges in continuing to marketing such kinds of life insurance products as a rate of interest drop at a very high speed. Moreover, customers may also begin valuing liquidity which is why there might be a little more stress on long-term savings insurance plans.

Impact of COVID-19 on Life Insurance Premium

UAE is still affected by the coronavirus since the pandemic has left a bad impact across the several economy sectors. In a few cases, this impact is minimal but in sectors like life insurance, there is a huge impact. The COVID-19 is basically a reminder that life can take an unexpected turn without prior notice. As per the survey conducted in 2018, 50% of UAE residents did not have a life insurance policy. The UAE’s 9.89 million population has a median age of 32 showcasing that life insurance plans might not be a financial priority for young people. Plus, there is a myth that life insurance is expensive. However, it is expected to change the way the people in the UAE look at the life insurance cover and bring some positive changes in the long run.

Some of the insurance providers who offer the best life insurance in UAE have extended the grace period for premium payment which is eventually affecting the renewal premium growth. In addition to this, some of the life insurance providers are offering coronavirus coverage for their existing customers and process the claim immediately. In addition to this, few life insurance companies may also see a rise in claims since the death toll rising during COVID-19. With increased death claims, it may entail the highest claim settlement this year.

For insurance companies, it would be a double whammy of a rise in death claims as well as portfolio risks. This is why, life insurance premiums might get increased in the future.