Will coronavirus shoot up cost of medical insurance?

A couple wear protective face masks as they kiss, due to the outbreak of the coronavirus at Jose Joaquin de Olmedo International Airport in Guayaquil, Ecuador March 13, 2020. [Reuters]

Insurance companies are staring at loses if claims will skyrocket in the instance coronavirus severely spreads.

This is amid uncertainty whether the cost of medical insurance might shoot up as insurers develop new policies to cover the virus which has caused over 4,000 deaths globally.

Already, there was a flip-flop on insurance firms footing the bills for victims with the virus after the World Health Organization on Wednesday declared the virus a pandemic.

Standard medical insurance excludes epidemics and pandemics.

Insurance firms, through the Association of Kenya Insurers, held that patients were on their own as paying coronavirus-related expenses would run them out of business.

“A pandemic is a general exclusion in the insurance policy and therefore Pacis would not undertake the hospital bills that come with the management of the infection,” one of the insurance companies, Pacis Insurance, said in a letter dated March 13.

The Insurance Regulatory Authority (IRA) on Friday said this would not be the case as insurance firms will cover all policyholders infected by the virus.

IRA CEO Godfrey Kiptum said the agency had engaged the insurance companies and they had agreed to continue providing the services.

“The consideration has been arrived at in support of the government’s mitigation measures aimed at minimising exposure to policyholders and beneficiaries,” Kiptum said.

The agency’s head of corporate communication Noella Mutanda told Standard Digital that the cover would continue as per the current policy.

This means one would not have to pay extra to cater for coronavirus related bills.

Due to fraudulent claims, medical insurance is one of the top loss-making categories for insurers.

In 2018, the medical insurance business made a loss of Sh1.1 billion, according to statistics from the Association of Kenya Insurers.

The insurance industry’s loss of Sh2.87 billion in that year was attributed offshore placement of business, non-compliance in declaration and over-ceding of premiums for instance medical class leading the insurance firms to operate on low premiums of around 75 per cent of gross written premiums.

Such consistent loses in the industry has seen firms increase underwriting rates, effectively passing the cost to the insured.

The United States is also already predicting loses with insurer expected to pay Sh9 trillion ($90 billion) in medical claims, according to S&P Global Ratings.

The agency estimates roughly 50 million insured Americans will eventually get the new coronavirus.

Under a more moderate outbreak, insurers are expected to pay claims of about Sh3 trillion.

“The key difference is saying how many people end up in a hospital … in the hypothetical severe scenario, we are looking at about 4 million people in a hospital, whereas in a moderate scenario we’re looking at about a million people,” Deep Banerjee, lead insurance analyst at S&P Global Ratings to news outlets CNBC.

Kenya confirmed its first positive case of the virus on Friday.

The 27-year-old female patient - a Kenyan citizen - arrived in the country on March 5 from the United States.

She is admitted at Kenyatta National Hospital's Infectious Disease Unit in Nairobi.

“We have done all the contact tracing and have all the names including the people who sat next to her on the flights she took,” Health CS Mutahi Kagwe said when he made the announcement.

Globally, the disease has increased 13-fold outside China where it originated late last year.

There are now more than 118,000 cases in 116 countries, and over 4,000 people have lost their lives, according to the World Health Organization.