Covid-19: What Happens Next?
The coronavirus pandemic has given society a timely reminder that we are all vulnerable. Income inequality had become a 21st century focus in western countries, but it equally applies across international borders with huge variances in the standards of living across the globe.
It was very easy to forget we lived in a position of privilege and a common phrase to express concerns was often the classic “first world problems”. The virus has made us realise that life can change in an instant and the world we live in is somewhat different from what we enjoyed as recently as New Years Eve. Welcome to the “new normal” and we are still defining that.
What may be a trend in the aftermath is a greater recognition that health and wellbeing are essential factors as opposed to discretionary lifestyle choices. As evidenced around the world, the rate of fatalities has been exacerbated by co-morbidity factors that for many were the outcome of poor lifestyle and health management choices - diabetes, hypertension, obesity and heart disease.
An upside of our lockdown was seeing the increased physical activity of many New Zealanders with walking, cycling and running becoming a part of people’s daily routine. Hopefully those habits have been locked in to future behaviour.
What we here at NZDIS noticed was a number of calls from members wanting reassurance about what insurances they had in place and how those policies would respond. In essence, when feeling vulnerable, people like to know what security or protection they have. This applied to both their personal and business covers.
In respect of business covers - the greatest number of queries were in respect of the Business Interruption portion of a commercial insurance plan. In broad terms Business Interruption is to protect the business from income losses as a result of “physical loss or damage”. This event did not cause a physical loss or damage and there is a pandemic exclusion in the general clauses of most policies. Therefore, there was no coverage for coronavirus related issues, including “lockdown”, within the commercial insurance plan.
Personal policies in place on the life of the member (even if for business purposes) may include Medical, Disability Income Protection, Total Permanent Disablement, Trauma and Life cover. The Medical policies for our members have no restrictions specific to the virus. Therefore, medical treatment required would be covered. Although in respect of the virus itself this has been provided through the public health system. Where individual policies may play a role is in respect of secondary outcomes that present in the future.
Disability Income Protection policies respond directly to your personal position. That is, a benefit is payable when you are off work as a result of injury or illness. With medical certification a benefit would be payable once the wait period (stand down period) of your policy has been met and would continue until you are deemed medically capable of returning to work or for the maximum period of insurance under the policy. This can vary from 52 weeks through to age 70.
If you were to become infected with the virus the length of time of a claim would be determined by the certifying doctor of how long you were unable to work. This could be as short as 7 days (mild flu like symptoms) through to many weeks – hospitalisation and long-term care.
It is important to note that mandatory isolation would not trigger a claim (eg. quarantining after having been notified you have been exposed to the virus but are not exhibiting any symptoms or returning from overseas). In these situations you are not incapable of working due to suffering an injury or illness.
Similarly, there is no benefit payable on your Disability Income Protection policy if an associate or staff member are absent from work.
Lump sum insurance policies in most cases do not exclude the virus. Those that have broad pandemic exclusions have seen most insurers confirming this would not be applied should a claim arise. If you have Life Cover, Total Permanent Disablement Cover or Trauma Cover then policies will respond to a claim in the normal manner providing the existing terms and conditions of the policy are met.
What all readers should be aware of is that existing policies issued by life insurers cannot have the terms and conditions modified. A life insurer cannot add in new exclusions to existing policies. However, fire and general insurers are able to change the policy terms or withdraw cover at each policy anniversary.
These are important factors to consider when you review your insurance plan. There are other factors to also be aware of at this time. Some Insurers, faced with not knowing the long-term effects, have imposed restrictions or exclusions for new policies.
This has mainly been for disability income protection where we have seen maximum benefit limits capped and claim benefit wait periods extended. There is also acknowledgement of additional government subsidies available to people not working. These are recognised and may be offset against a disability income protection claim.
As is always the case if reviewing, altering or upgrading your insurance programme it is important to discuss the implications with your advisor.
Continue to stay safe.