Insurers in Taiwan are facing a huge blow to their claims ratios and reputations as the more contagious Omicron variant of COVID-19 sweeps through the island.
Last year, insurers sold millions of COVID-19 policies that would pay out if the policyholder contracted the virus, The Wall Street Journal reported.
However, with case counts surging, insurers are facing a deluge of claims and anger from the public.
Since the pandemic began in 2020, Taiwan was seen as a model for preventing the transmission of the disease, with its strict border controls, quarantine and contact-tracing measures. Taiwan did not record a single local transmission of COVID for a period of over 200 days in 2020 and was able to get an outbreak under control in 2021.
The strict protocols meant that COVID-19 patients and their close contacts would go through government-imposed isolation or quarantine, causing large disruptions to their lives. Taiwanese insurers responded by launching various products that gave lump-sum payouts, which ranged from about US$340 to US$3,400, for those who tested positive for the virus or had to be quarantined. Premiums were quite low at around US$30 for one year, which made it popular among consumers.
However, in recent months, Taiwan’s government shifted away from a zero-COVID policy, loosening restrictions and causing case rates to shoot up. In late May, daily infections exceeded 94,000, before settling at 50,000. This resulted in a huge number of claims from customers holding COVID-19 insurance.
Close to 270,000 claims have been lodged so far, translating to around US$357 million in compensation. Regulators and analysts are predicting higher losses for the insurance industry, and insurers have also stopped selling and renewing such insurance policies, causing anger among customers.
According to the report, a legislative session on the debacle was held last month, where a lawmaker asked a top official of Taiwanese regulator Financial Supervisory Commission whether total claims from COVID-19 policies could reach the equivalent of US$1.4 billion, a figure that was derived from an estimated 15% of policyholders contracting COVID.
FSC chairman Huang Tien-mu said the claim tally could be even higher, adding that it would be difficult to provide an accurate estimate of losses while the situation was still evolving.
Roughly 14% of Taiwan’s population of 23 million has contracted the virus, and the number is still rapidly rising.
