Tuesday, August 4, 2020

What the pandemic costs insurers

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Frankfurt In February, Allianz CFO Giulio Terzariol was relatively carefree. Europe’s largest insurer is currently not afraid of high burdens as a result of the spread of the corona virus, the top manager at the time self-confidently declared at the press conference in Munich as a motto. The insurance of companies against business interruptions is usually only effective if the cause is real property damage.

In addition, the alliance does not offer any policies that would cover an epidemic risk. A good one and a half months later, the top man of the Dax 30 group sounds a little more cautious on this issue. The damage for unusual events alone was in the three-digit million range, Terzariol now admitted. But the resistance of the group is very great.

The industry’s initial serenity about the financial consequences of the novel lung disease has vanished. The corona crisis will cost insurers a lot, believes the consulting firm Meyerthole Siems Kohlruss (MSK).

The compromise reached a few days ago in Bavaria with politicians and restaurants over a partial payment for the company closure policies will cost the industry around 300 million euros, estimates MSK Managing Director Onnen Siems. At the beginning of April, all parties agreed to pay ten to 15 percent of the agreed daily policy rates to the restaurateurs concerned if they had to close due to Corona.

Among other things, Allianz, the Versicherungskammer Bayern (VKB) and the liability insurance company, which specializes in the catering industry, agreed to pay damages from the closure of companies. The refusal by a number of insurers to pay damage from the closure of grocery stores, hotels and restaurants due to the Covid 19 virus had previously met with harsh criticism from customers and insurance brokers. But this is not the only area where Corona hurts insurers.

For some, the pandemic is an opportunity

It could also be expensive for legal expenses insurers. Because many customers are likely to step up to the Kadi because of the new special regulations, which include the deferral of rental payments in the event of bottlenecks due to Corona. “According to an initial estimate by Meyerthole Siems Kohlruss, up to 500 million euros in damage can come to the industry,” explains Thomas Budzyn, project manager of the legal protection data pool of the consulting company.

For many insurance companies, Corona is a stress test. The crisis shows the deficits in digitization of many established providers more clearly. After all, thousands of employees currently have to work from home in the home office – if the systems allow it.

The pandemic may be a risk for all insurers, but for some it is an opportunity. The MSK experts predict that there will be divisions that will benefit from the crisis. This could include accident insurance, household contents insurance and the private liability policy. The experts estimate that since many people are hardly allowed to leave the house due to the strict regulations, there will also be less damage. The number of burglaries is likely to decrease significantly, which can already be seen in part from the data from the state criminal police offices.

Car insurers are likely to be among the biggest beneficiaries. The number of accidents has fallen by up to 50 percent since the shutdown. “By the end of April, the industry is likely to save more than a billion euros in claims expenses,” estimates the actuary Onnen Siems. The auto lines of business of the insurers are usually anything but profit machines, which is why many companies are reluctant to pass on the savings.

In the end, however, customers could also benefit a little from the forced trend. Because if the annual mileage drops significantly, the motor vehicle premium can be significantly reduced in November at the latest when changing providers. To do this, however, the car owner must assume that he will drive less in the shadow of Corona in the next twelve months and that his driving performance will remain lower. It is a perspective that many commuters may not be comfortable with.

More: The federal government and credit insurers secure German trade.

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