Insurers, a Windfall from 'Novel Coronavirus' Like 'MERS'?

Wuhan Pneumonia May Act as a Short-Term Boon for Non-Life Insurers... Loss Ratio Improved During MERS
Loss Ratio Deterioration Due to Medical Cost Surge Could Improve

[Asia Economy Reporter Ki Ha-young] Amid growing concerns about the spread of the novel coronavirus infection (Wuhan pneumonia) both domestically and internationally, an analysis has been presented suggesting that the new coronavirus could act as a short-term positive factor for non-life insurance companies.

Jung Joon-seop, a researcher at NH Investment & Securities, explained on the 31st, "The spread of Middle East Respiratory Syndrome (MERS) was a national misfortune, but paradoxically, it acted as a windfall for non-life insurers," adding, "At that time, concerns about hospital-acquired infections led to a decrease in hospital visits (resulting in reduced medical expense claims), which significantly improved the long-term loss ratio for non-life insurers."

Researcher Jung forecasted, "There is a possibility that the current Wuhan pneumonia situation could provide a starting point for improving the long-term loss ratio," and "At least in the first quarter of this year, some improvement effects on the long-term loss ratio are expected to appear."

In fact, the novel coronavirus is spreading worldwide. According to the World Health Organization (WHO), there have been 98 confirmed cases in 18 countries outside China, including 8 cases of human-to-human transmission in four countries: Germany, Japan, Vietnam, and the United States. As of the previous day, the number of infected individuals was approximately 8,000 in China, 14 in Thailand, 11 in Japan, and 10 each in Hong Kong and Singapore. In South Korea, 7 confirmed cases have been identified.

In response, the WHO declared the novel coronavirus a "Public Health Emergency of International Concern" (PHEIC) the previous day.

The current novel coronavirus is mainly being compared to the relatively recent MERS outbreak. MERS first appeared domestically in May 2015 and spread significantly from June to September. By October, there were a total of 186 infected cases and 36 deaths.

At that time, concerns about hospital-acquired infections led to a decrease in hospital visits. This resulted in reduced medical expense claims and an improvement in the long-term loss ratio for non-life insurers.

According to NH Investment & Securities, the operating day loss ratio (= loss ratio / number of operating days) of four non-life insurers (Samsung Fire & Marine Insurance, DB Insurance, Hyundai Marine & Fire Insurance, Meritz Fire & Marine Insurance) dropped by 0.4 to 0.6 percentage points from 3.9-4.9% in May to 3.5-4.4% in June. Notably, the effect was more pronounced in the second-tier companies, which had a higher proportion of actual loss insurance at the time.

Researcher Jung stated, "Although the long-term loss ratio rose again after MERS subsided, the increase was not significant," and added, "This was partly due to the insurance industry's active underwriting strengthening and rate hikes, but the heightened awareness of health and hygiene following the MERS impact likely also played a role."

He concluded, "One of the main causes of the deterioration in the non-life insurance market is the rise in the long-term loss ratio due to a surge in medical expenses," and assessed, "While fundamental market improvement will take some time, the current novel coronavirus could act as a short-term positive factor for non-life insurers."

This content was produced with the assistance of AI translation services.