In: Economics
Would you say that getting the current corona virus is an insurable or uninsurable risk? Why? If you answered uninsurable risk, which category would it fall under: Changes in the general economic environment, Changes in the structure of the economy, Changes in government policy, or New products or production methods pioneers by rivals.
Answer-- As of late, all risk management professionals have been engaging in challenging conversations with their clients. The unfortunate truth is that the insurance industry never anticipated a major outbreak like the Coronavirus, and therefore, has not drafted any policy to provide specific coverage for this scenario.We are in uncharted territory. At the moment, it is unlikely there will be any major relief provided by insurance policies without strong governmental intervention. At baic level Corona virus is unisurable because two tenets paramount to underwriting risk include frequency and severity. An insurer cannot quantify these factors for a given risk, then that scenario does not meet the definition of insurance and is not insurable. Any such uninsurable risk becomes a gamble or a game of chance due to its unpredictability.We believe as claims are submitted and insurance companies are challenged, the industry leaders will argue that companies never intended to cover such losses, and to avoid future court challenges, more carriers will design more specific exclusions. We have seen this happen in the past with exclusions for War, Nuclear Hazard, Flood, Terrorism, and even Sexual Abuse. Most companies already have exclusions for Virus in the Property and Business Interruption policies, many reading: We will not pay for loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness, or disease.Corona virus risk will be fall under unpredicted risk category ,hence there will initially no claim for this risk.there should be strong intervation of governments of different countries in the world to change some economic policies which will make this risk as insurable.