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Wednesday, March 4, 2020

How Medical Costs of Coronavirus Reimbursed by Insurers?

How Medical Costs of Coronavirus Reimbursed by Insurers?

Before the appearance of 2 (two) recent cases of coronavirus or COVID-19 experienced by patients domiciled in Depok, West Java, Indonesia, insurance companies or insurers operating in Indonesia were not very anxious. 

But after the coronavirus case was officially confirmed by the Indonesia government, the insurance companies had to start conduct analysis or more depth calculations of the possibility of the emergence of insurance claims in large numbers.

In a business operation concept, the survival of insurance companies depends on the number of claims incurred compared to the premiums collected. If the claim frequency is high and the value of claims settled is small, this condition is still not very influential for insurers, but if both parameters show high numbers (both frequency and severity) then it might cause "disruption" to the company's ability to fulfil its obligations in paying the claim to policyholders.

High frequency of claims that create a potential loss for insurers, among others, are sourced from catastrophic claims. In property insurance, natural disasters such as earthquakes and floods are examples of catastrophic events that could endanger the operation of insurers (apart from the reinsurance back up mechanism that is commonly applied in the insurance industry).

While in the life insurance industry, the same possibility with general insurance, can occur in cases of an epidemic and/or pandemic diseases. For example, in the case of the coronavirus, WHO (World Health Organisation) has established its status as an epidemic but has not reached a pandemic status even though they have raised its status from an epidemic to Public Health Emergency of International Concern (PHEIC).

The public who has bought or has a health insurance policy or a cash plan benefit policy needs to reopen the insurance wording the policy carefully. Although in the case of coronavirus, it has not been categorized as a pandemic event, there may be a number of insurance companies that still cannot pay the costs of hospitalization of policyholders. This is because the policy condition is slightly different. For example, in the insurance wording issued by one of the Indonesia insurance companies, it states that "the company is free from the obligation to pay claims if the Insured dies as a result of an epidemic disease determined by the Insurer." This provision provides insurance companies with greater flexibility and to unilaterally declare their release from the responsibility of paying claims on the basis that a statement that the certain incident as an epidemic status is determined solely by the Insurer and is not based on the official statement from the higher authority, for example, the Indonesia government.

But at least until now there is a statement from AAJI (Asosiasi Asuransi Jiwa Indonesia - Indonesia Life Insurance Association) as reported by CNN Indonesia (Feb, 29) that the coronavirus is not a pandemic so that insurance companies offering health insurance products must pay claims to customers suffering the disease. This certainly refers to the WHO statement above that until now that organization has not stated a pandemic status in the case of the coronavirus that is now affecting many countries. According to AAJI, coronavirus or COVID-19 is still considered a disease in general and so must be covered by an insurance policy.

The above statement issued by AAJI is expected to be able to provide understanding to public, especially the policyholders of life insurance, health insurance, and inpatient insurance, that diseases due to coronavirus can still be filed claims to insurance companies as long as there is no change in status from the competent authority from ordinary events to pandemic event in global.

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