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The Covid-19 pandemic has had wide implications for the insurance industry and the insured public globally - both in terms of financial impacts and future risk management

Insurance cover is an integral part of everyday life and often taken for granted. Yet, despite this inertia, we do need to consider the impact that the pandemic will have in the post-Covid-19 era. This article addresses some of those issues with the backdrop of the UAE legal and regulatory framework and discusses whether and to what extent a new or adapted insurance regulatory framework may be needed to meet these challenges.  

The Middle East, including the UAE, has also been impacted in terms of insurance risk and management.

While there are many unknowns in terms of how this should be managed moving forward, insurers will, in a post-Covid-19 era, need to consider certain aspects of risk management, such as underwriting, asset investments, claims management, capital and reserves (for those in highly regulated jurisdictions), reinsurance placements, new risks and the appetite for insuring those risks, and the future of the insurance value chain and how that is likely to change. 

These aspects of risk management will of course change with new technologies in the insurance market (often termed 'InsurTech'), which for all intents and purposes have been accelerated with the advent of Covid-19.

While the lockdown in many countries have reduced insurance claims and raised profits for many insurers, i.e., motor insurance by way of example, where there were fewer cars on the road, which reduced accidents and claims and health insurance, where many elective procedures were cancelled and hence reduced claims, this may only be short term in a post-Covid-19 era. 

Where we will see change with insurers is perhaps with new business and new risks that this period has presented. For example, life, health, and travel insurance products may take on different risk profiles with higher premiums and higher conditions to be met by the insured for this cover. 

We have seen recent coverage disputes arising out of business interruption claims under several property insurance coverage policies in the United Kingdom, where the UK Supreme Court, on appeal found in favour of the insured. These judgements will have wider implications for the global insurance market in terms of higher premiums, more restrictive conditions of cover and selective underwriting. 

While it may be argued that Covid-19 and its impact may reduce access to insurance coverage, it may also have accelerated the InsurTech boom, which in turn can paradoxically drive more demand and access to insurance. 

It has accelerated and to some extent allowed insurance technology to play a pivotal role in the future of how insurance will be managed. We may see the insurance value chain, that is, from consumer to insurance broker to insurer to reinsurer completely change resulting in technology platforms dealing directly with reinsurers and lessening the insurance value chain. Indeed, insurance brokers may become a new technical beast providing platforms for insured members for immediate access and coverage, often what is termed 'on-demand' insurance.

Given these possible future changes, are legal and regulatory systems ready to cope with these changes? The UAE will need to adapt its regulatory framework to cater for these requirements, while also protecting consumers and we may see this as a slow change given the complexity of insurance and its traditional old school position, where it has not embraced technology as much as the banking industry. That said, and for the immediate term, in a post-Covid 19 era, we will see a different insurance landscape, with probably restricted access to certain insurance coverage types, while the insurance industry recovers and explores new risk management techniques including the use of technology, which will no doubt present challenges with the current regulatory framework.

Simon Peter D Isgar, Partner at Head of Insurance and Reinsurance Legal Practice

• Business and Technology Review