The appearance of the new SARS-CoV-2 virus, classified as a pandemic due to its unique characteristics, has led to the establishment of extraordinary urgent measures worldwide to safeguard people’s lives. The impact of Covid-19 on Life Insurance, which ensures both people’s lives and long-term savings to supplement their retirement pension, has been immediate.
It should be noted that the life insurance companies punctually satisfy the compensation corresponding to the death coverage of their policyholders, in addition to having created, voluntarily and altruistically, the largest group insurance in the history of Spain.
Solidarity fund for personnel in the health sector and nursing homes
More than 100 insurers have created a solidarity fund endowed with 38 million euros to cover the contingencies of death and hospitalization of more than 700,000 people who work in the health sector and in nursing homes; For more information, you can visit the following UNESPA page In the event that the accident rate is less than the fund set up, the remaining amount will be used to support research on the coronavirus.
Social and economic aspects
The impact of Covid-19 will be seen in all social and economic aspects in the coming months. Its rapid spread throughout the world has caused hundreds of thousands of deaths, especially among the population over 65 years of age or with pre-existing diseases, which is why Covid-19 has been declared a pandemic by the World Health Organization. And the impact of this new disease goes beyond its tragic consequences in terms of loss of human life. In order to stop the spread of the virus in almost all countries, measures of distancing, restriction of mobility, and confinement of the population, in general, have been applied, which have meant a dry stop for the economy that could lead to a serious economic recession, in the short and medium-term.
Supply and Demand Shock
The pandemic, together with the measures of the Governments, have simultaneously caused both a supply shock, reducing the capacity of companies to carry out their normal activity, and a demand shock, by restricting the capacity and desire to consume of confined and subjected households—great uncertainty about his near future.
Unemployment
The increase in unemployment, which is already proving to be very significant in Europe and the United States, and the high uncertainty about the health and economic consequences that the pandemic will have, reduce the incentive for companies to invest while increasing the propensity of households to save, reducing their consumption.
Public Deficit and Indebtedness
The historic increase in the public deficit and the indebtedness that the States are going to have to assume to deal with the health, economic and social consequences of the pandemic may further reduce the propensity of economic agents to consume and invest, as they are exposed to greater uncertainty due to the probability of future tax increases to deal with the imbalance in public finances.
As an alternative to tax hikes, Central Banks could also buy all the new debt, directly or indirectly, expanding the money supply, which in the long run could cause the public to lose confidence in the currency as a store of value and lead to high inflation rates.
Although effective medicines and vaccines are finally developed for the treatment of Covid-19, the new habits of social distancing (voluntary or forced) will continue for many months, negatively impacting many business models related to leisure, tourism, transport, shows, and restaurants.
The restructuring of these sectors will greatly impact the economy, traditionally very dependent on the service sector and tourism, aggravating all the effects above.
However, these economic expectations that could not be favorable for the new contracting of insurance will highlight the benefits of forecasting and the long-term savings that classic family health insurance entails.
