Even though the direct and short-term blow of the virus on the insurance sector seems to be less than other sectors, the bleak outlook for Iran's economy struggling for extended periods has made insurers anxious about the future of their business.
Iranian Insurers' Syndicate recently published a report assessing the extent of the virus influence on the key industry. It forecast 13% increase in insurance companies' premium income during the current fiscal year (March 2020-21).
This is while, insurers posted 32% growth in their generated premium in the previous fiscal year.
As per the report, insurers' debt ratio stood at 49% last year, the ratio is likely to climb to 62% by next March.
Traffic restrictions imposed by the government to contain the spread of covid has led to a sharp decline in insurance companies’ auto category payouts in the past two months.
Third party auto policy normally accounts for the largest part of payouts - 40% on average. Nearly 118 trillion rials ($737.5 million) was paid to policyholders in eleven months to Feb. 19 in claims in this category.
Suspension of trade and travel industries has further hurt insurance companies’ relatively high revenue from the transportation and travel sector.
People also are less likely to afford life insurance on a regular basis, which could add to insurers’ pangs in the near future. Policyholders' debts to insurance companies now is said to be in the range of 200 trillion rials ($1.2 billion).
Pressure Mounts
The government's approach to help address their financial woes is also among the pressing concerns of insurers.
"Authorities usually put pressure on some selected sectors. Now the Health Ministry is facing problems [due to the infectious disease] and has asked insurers to pay their dues before maturity dates," Majid Bakhtiari, the CEO of Razi Insurance, told Bimehdari Novin magazine.
In mid-March, insurance companies in Iran gave nearly 4.5 trillion rials ($28 million) to medical centers affiliated to the Ministry of Health to help them meet financial commitments during the present covid crisis.
As per law, insurance companies must pay 10% of their revenue from third-party auto insurance policy - the category with the highest share in insurance companies' portfolio -- to the Health Ministry.
Insurers have always been reluctant to pay this tax and they say they have no way to check how the money is used.
Iran has confirmed more than 112,725 cases of the infectious disease and 6,783 deaths by Wednesday noon.
Innovation
"There, however, are some opportunities for insurance companies to salvage their business," Ebrahim Tahsiri, the CEO of Moalem Insurance told Bimehdari Novin.
He says insurers can and should shift focus towards innovative coverage.
"Responsibility insurance exclusively for physicians, or life insurance packages covering pandemics could be suitable for customers” in the present conditions.
The IIS' report also suggests insurance firms to work on developing online platforms for selling insurance policy, offer incentives to sales network and form consortiums.
It also recommends insurers to focus on special packages for online business, SMEs and low-risk investments to survive future challenges.