Coronavirus: Insurers missing in action as banks weigh in

The insurance industry has yet to make a co-ordinated response to the coronavirus crisis. Photo: Supplied

The banking industry has bent over backwards to show its support for customers but until today, when NIB issued a profit upgrade, the insurance industry has been missing in action.

In this climate, for a company which in January had downgraded estimates from a profit of $200 million to $170 million, it seems incongruous at first glance.

But the reality is fewer people are travelling, which means less policy income but also lower claims. More importantly elective surgery rates are plummeting, as are dental visits.

The net result being lower payouts for the industry and today NIB’s Mark Fitzgibbon, without saying it in as many words, explained how he is making out like a bandit.

Last year his ARHI unit paid $988 million in claims on 281,757 episodes in Australia.

It also paid $229.5 million in net equalisation transfers because it is more efficient than some of its peers.

For every 1 per cent fall in episodes, NIB’s claims expense falls by $8.8 million and every 1 per cent fall in dental visits by $3.5 million or $12.3 per cent in total.

A fair call would be to say both elective surgery and dental visits will be down 30 per cent this year. So that translates into a $369 million fall in expenses.

Which in turn translates into an increase in profits in excess of the $200 million Fitzgibbon was talking about back in January.

He wisely didn’t put a figure on its, because now is not the time for a health fund to be saying how much money it is making.

The other listed fund, Medibank, doesn’t have to put a figure out there because it didn’t provide specific guidance, other than saying the second half would be better than the first.

That turns out to be a classic understatement at a time when the health funds like us all coming to grips with the enormity of the health crisis at our doorstep.

Insurance is a little more complex than banking, with all sorts of legal requirements about how the business needs to be run.

Health funds are virtually an offshoot of government, given the regulation involved.

But the industry is albeit belatedly working through what it can offer customers.

Obviously travel insurance can be refunded now no-one is travelling thanks to government bans.

People who land in financial difficulty because they were one of the 20,000 put out on the street by Qantas’ Alan Joyce, among other businesses, will also have some compensation from the industry including suspension of fee payments.

Supplier payments are being fast forwarded to get more money into small businesses hands.

Medibank, for one, helped the government out with more nurses.

These are among the options being considered.

It is in the industry’s interest to get a list of such measures finalised and out in public because right now the industry isn’t looking too flash.

Just how a travel insurer can deny a claim when the government of the country you were planning to visit won’t let you beggars belief.

The exclusion around the virus is extraordinary and the danger facing the industry is having seen how adept insurers can be at dodging claims more people will question the need to pay premiums in the future.