Coronavirus epidemic impact on China’s non-life market likely to be limited

Global rating agency AM Best expects China’s non-life insurance market to experience limited losses from the ongoing coronavirus outbreak, due to factors including the central government’s announcement to undertake all medical expenses related to the 2019-nCoV diagnosis and treatment, coverage exclusions, and the lack of claim triggers for business interruption risks under typical property policies in China.

A new Best’s Commentary, titled Wuhan Coronavirus Epidemic Impact on China Non-Life Insurance Market Likely to be Limited, states that in AM Best’s view, individual policyholders are unlikely to incur material medical expenses that would require claims to be made on their private health covers, given that the government will bear medical diagnosis and treatment expenses.

“Although the epidemic is likely to dampen China’s gross domestic product growth in first-quarter 2020, economic losses from business interruption are unlikely to trickle down to the insurance sector through typical property insurance policies in the country,” said AM Best. “Lines of business that may be affected include travel insurance, although such coverage varies according to policy wordings. Personal accident covers typically exclude epidemics, as the insurance industry’s experience with the Severe Acute Respiratory Syndrome outbreak in 2003 has led insurers to exercise increased caution.”

In AM Best’s view, over the short term, the coronavirus epidemic will likely have a negative effect on insurance companies’ top line growth as new policy sales during the first half of 2020 may be decreased because of contagion containment measures, which discourage in-person interactions, as well as an overall slowdown of economic activities within the country.
In 2019, the non-life insurance market in China posted double-digit growth in direct written premiums compared with the previous year, propelled by over 30 percent year-over-year growth of the short-term health insurance segment, of which the majority are reimbursement-based policies that supplement social medical coverage.

Over the longer term, AM Best believes that the current health emergency likely will drive increased consumer awareness of general health risks, which would in turn could boost the sale of health insurance products in the future, as well as foster insurance product innovation and differentiation in the industry.

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