Wed | Jan 27, 2021

Life companies elude health-claims shock, future premiums vulnerable

Published:Friday | July 3, 2020 | 12:28 AMNeville Graham - Business Reporter

President of the Insurance Association of Jamaica, Vernon James.
President of the Insurance Association of Jamaica, Vernon James.

Health insurance providers are reshaping the way they do business to deal with the fallout or exploit opportunities from the COVID-19 pandemic, which they say has not been as harmful to their business as first anticipated.

In what they describe as a mixed bag, the insurers have seen a fall-off in claims in some areas – for that they credit the national movement around the lockdowns and measures to contain of the virus – but their future premium income is in danger of erosion because of the virus-induced slowdown in business and job cuts, and the vulnerable financial positions that companies and individuals are in because of it.

“Persons are holding on to their coverage as much as they can, although some are finding it difficult, given the uneven impact of the pandemic on various sectors of the economy,” said Vernon James, the current president of the Insurance Association of Jamaica, IAJ, and managing director of NCB Insurance Company.

Willard Brown, executive vice-president in charge of the Employee Benefits Division at Sagicor Life Jamaica, says the tourism and entertainment sectors are the hardest hit. Both sectors had total shutdowns from March to early June.

“In some instances, they have expressed that they are having difficulty paying the premiums. We have been trying to accommodate them on a case-by-case basis, taking into consideration the unique circumstances of each employer,” Brown said.

Unserviced demand

The health insurance market is valued at around $25 billion – with Sagicor as the dominant player with a more that 65 per cent share – and accounts for roughly 15 per cent of the business done by life insurance companies, industry sources say.

James notes that health insurance providers have only penetrated around a quarter of the market, which implies that there is a large, unserviced demand for medical insurance.

The life sector has seven players, most of which provide some form of medical coverage, such as critical illness, but the big providers of health insurance are Sagicor Life; Guardian Life Limited; and newcomer Canopy Insurance Limited, which is a joint venture between conglomerates GraceKennedy Limited and Musson Jamaica Limited.

Having just started writing business in the final three months of 2019, Canopy could have had a hard introduction to the market had COVID taken any significant toll on group health subscribers. Instead, GK Group CEO and Canopy Chairman Don Wehby boasted this week that both revenue and group health membership had exceeded projections, the latter by 43 per cent, making GK “extremely happy”.

Canopy CEO Sean Scott says the Government’s social-distancing policies had actually served as a check on insurance claims.

“Some categories declined temporarily due to stay-at-home measures, and we have seen those returning to normal levels in recent weeks,” he said.

Brown adds that, generally, claims have been stable at Sagicor, but the company had also seen a reduction in some categories of claims, particularly those related to dental care.

He adds that insurance providers are seeing new interest and acknowledgement of the importance of health policies, but affordability is a challenge for many.

“The financial hardship that clients may be facing is also a reality, which works against their ability to purchase,” he said.

Canopy launched into business with a captive market drawn from the workforces of the two large conglomerates that own it, but Wehby’s statement suggests the company has been able to grow beyond that “having,” he said, “signed a number of clients ranging from small entities, to large, blue chip accounts”.

Scott says Canopy was able to grow its premiums above budgeted levels throughout the pandemic, while keeping pricing levels constant.

Two member companies of the IAJ have rolled out new health insurance solutions since the COVID-19 pandemic, according to James – Sagicor, with a plan for the workers in the tourism sector and NCB Insurance with its Hospital Cash product.

“As the economy gradually begins to open over the next 12 months and we learn to live with COVID-19, we anticipate an increase in health insurance protection. Currently only a third of our workforce and a quarter of our population have insurance coverage,” he said.

Brown says over the last three months, Sagicor, which is both the largest health and life insurance provider, has been doing better than feared under the pandemic, but is still in a wait-and-see mode regarding what the final toll will be. The Jamaican economy has been reopening in phases since June 1.

“The outlook depends on how well the economy rebounds in the near to medium term, as well as the continued success in keeping down the national level of infected cases,” Brown said.

Scott sees industry headwinds for the employee benefits segment, also referred to as group health insurance, since growth in that market segment is often tied to job creation and rising wages – both of which may be constrained by the contractionary economy, he says.

But he also sees an upside to the health crisis.

“In contrast, the importance of health and being insured for unexpected events is on the forefront of people’s minds at this time, and Canopy believes this will ultimately offset industry headwinds as the country adjusts to a new way of life in the months ahead,” Scott said.