At a time the government, regulators, banking industry and other sectors are going out of their way to help those in difficulty, the travel insurance industry is seemingly not always reading from the same script.
In doing so they are shouting from the rooftops why customers should steer clear when next they travel.
The whole argument about sustainable management is that the best way to maximise long-term returns is to support customers, the community and all stakeholders, which in the long term will boost shareholder returns.
The insurance industry has a more complicated rule book controlling its activities than, say, the banks, and to be fair it has also made concessions along the same lines as the banks — it just hasn’t been in the news as much.
Many of the same concessions were in place for the bushfires earlier this year.
Perversely, on a day when red ink dominated the bourse, health insurer NIB finished in the positive after confiding its earnings would be better than expected this year.
The mayhem around the coronavirus meant there would be less dental work and less elective surgery, which of course means less expenses for the insurance funds and, other things being equal, a higher profit.
Granted, this benefit should be short-lived because, if all goes to plan, when the coronavirus peak passes the punters will be lining up for that knee reconstruction they had delayed.
As has been well documented the travel insurance industry has general exclusions against pandemics, which means the virus is not a claimable excuse for cancelling your trip to a virus hot spot.
Same goes for a trip to a country in which the host government has closed the border and mandated weeks of isolation on arrival.
In which pages would you find the exclusions?
If its Covermore, then it’s on page 78 of the policy for the government intervention exclusion and page 53 for the pandemic exclusion.
How many people get their way to page 78 of their insurance policy or even page 53?
To be fair to Covermore, it also offers, at a slightly higher premium, a “cancel at any time” policy that allows you to do just that and get back 75 per cent of the fare.
If the airline is Etihad and is only offering credits on travel commenced before December 31 then that’s a better alternative and a policy benefit others don’t offer.
That, said a reasonable person may assume that, having taken the prudent step of taking out travel insurance on the advice of your agent, if the host government had put up the shutters because of an out-of-control virus then you would get coverage.
If you want to check your policy and have a couple of hours to spend waiting on the phone then the “help” line will tell you the answers you didn’t want to get.
The banks have been in the public sin bin deservedly for some years now and no doubt will again resume their role as a political tin can, but right now the industry is a beacon of light, showing a genuine commitment to their staff and customers and in the process the wider community.
The wider insurance industry is making similar efforts but is just not shouting it from the rooftops yet, and if you are a private health fund member you will be covered in hospital for any coronavirus illness.
If you can’t pay this month’s premium because you have lost your job the fund will still cover you and probably also let you resume normal service when you get your job back, without the waiting period.
The general insurance industry is also coming to the party on supplier payments, paying them in 15 days instead of 30 to help keep them going.
The industry is also working on getting more telehealth services covered, particularly for mental health patents most affected.
The industry does have a couple of regulatory burdens like the community rating, which doesn’t allow discounts of more than 12 per cent on any given issue, lest the big funds take too much share from the little funds.
This lunacy explains why NIB last year paid $229.5m in so-called net equalisation payments, because it is more efficient than other funds.
There are other ways the insurance industry could help, like refunding travel insurance premiums now the travel isn’t happening on government advice.
That means a loss of income for the travel sector but now is also a good time to show customer support to earn the business loyalty in the future.
NIB’s Mark Fitzgibbon went out of his way on Monday to show he was not the recipient of a giant gift in the form of lower elective surgery due to the coronavirus.
Now is not the time to look like you are making out like a bandit because the hospitals are focusing on a genuine global emergency.
Every 1 per cent fall in hospital visits adds $8.8m to NIB’s bottom line and every 1 per cent fall in dental visits another $3.5m.
Macquarie reckons the visits will be down by at least 30 per cent, which adds up to a temporary $369m fall in expenses.
NIB had in January downgraded its profit estimates from $200m to $175m; now we are talking about beating the first figure.
Medibank didn’t have to make a similar disclosure because it wasn’t as specific about this year’s profits, apart from saying the second half will be stronger than the first.
Regulatory relief
ASIC and APRA won plaudits on Monday for their decision to put all emphasis on the coronavirus, saying they would provide regulatory relief to help companies raise capital.
The ASX needs to do likewise because the reality for smaller companies is that an equity raising will struggle right now, which means the spotlight turns to its principals to fund the survival.
This means shareholder meetings and experts’ reports, for very sound reasons, but also costly ones — so there is a fine line the regulators need to walk to ensure companies survive, but not at the expense of minority shareholders.
APRA offered relief on capital rules, which also makes sense, because there is no reason to have a strong balance sheet unless you can use it when required.
That said, if tier one capital is 10.5 per cent and APRA lets the buffer drop to, say, 8.5 per cent, the bank will find investors will punish the bank in favour of those with stronger capital levels.
It’s a fine line to walk and while everyone is going overboard in an attempt to boost confidence the risks are also raised.
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Some sections of the travel insurance industry are providing a textbook lesson in why they should be avoided at all costs in the future.