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COVID-19 Pandemic: Insurance Implications


The COVID-19 Pandemic (“the Pandemic”) still rages unabated in April 2020, affecting lives, businesses, individuals and industries worldwide.

Many countries worldwide have imposed country wide lockdown which effectively shuts down businesses except for essential businesses. Apart from causing staggering fatalities, infections worldwide, the Pandemic also affects businesses, livelihood in many ways that will change the world forever.

On 25 March 2020, the Malaysia Government announced the Movement Control Order (Restricted Movement) for the whole Nation will be extended from 31 March 2020 to 14 April 2020. This Order is made under the Prevention and Control of Infectious Diseases Act 1988 and the Police Act 1967.

This article discusses the Pandemic effects on the Insurance Industry.


General Insurance

I. Impact in Malaysia

The General Insurance Association of Malaysia (“PIAM”), and the General Insurance Association of Malaysia and The Life Insurance Association of Malaysia (“LIAM”), and the Malaysian Takaful Association (“MTA”) reaffirmed that the member companies remain open to support the policy holders.1

Further, the industry has also made efforts to help affected people cope with the immediate health effects of the virus and the subsequent economic consequences2 whereby PIAM stated that PIAM, LIAM and MTA has pledged an RM8 million contribution to establish a special fund for COVID-19 testing for medical insurance policyholders and medical takaful certificate holders.

In addition, PIAM addressed questions posed on general insurance protection in relation to this pandemic3: –

(a) Coverage by the Hospital and Surgical Insurance (“HSI”) – HSI policy covers cost of hospitalization and healthcare services including room and board, doctor and surgery fees, medical supplies and services, etc. due to covered illnesses or accidents. A standard HSI policy generally excludes all types of communicable diseases requiring quarantine such as the current COVID-19 outbreak. However, many Insurers, out of goodwill, have agreed to waive the exclusion and provide cover for COVID-19. This is in addition to extra coverage offered by individual Insurers.

(b) Travel Insurance – A travel insurance policy generally covers travel related accidents, medical expenses, inconveniences etc suffered during the period of travel as stipulated in the policy. However, most policies will exclude travel to countries where travel ban or advisory had been issued by the local or foreign government of the destination country. As the terms and coverage of one policy may differ with another, consumers are advised to seek confirmation from respective Insurers before travelling.

(c) Motor Insurance – PIAM4 further addressed that all motor insurance shall be kept valid during the MCO period. Renewal of motor insurance can be done online.


II. Policy Coverage Concerns

Marsh5 has advised Insureds to review their requisite cover, particularly their Property Damage/Business Interruption (“PD/BI”) and Public Liability/Commercial General Liability (“CGL”) as these would be the policies most likely to have any applicability to the current situation.


Property Damage/Business Interruption (“PD/BI”)

(a) Falling Under the Definition of “Loss”

Many modern policy forms in use in the market will contain an “infectious disease extension” clause (the “ID Extension”) that will specifically write coverage for this event into the policy. Such clauses will add the closure of the insured’s business or premises due to an “order of a competent public authority as the direct and sole result of…any infectious or human contagious disease…,” to the definition of “loss” for the purposes of business interruption cover.

(b) Closure Due to Governmental Order

Under an ID Extension, it is essential that the cause of the Insured’s business or premises being shut down is due to a governmental order. This is because coverage may not be afforded in the absence of such an order. As such, documentation of any governmental order must be obtained and preserved for use in establishing your insurance claim.

(c) Language

Certain policies where there is language which requires that the infection for which resulted in the closure of business or premises (again via government order) is actually “present” at the location or upon the premises Insured.

In such circumstances, Insureds must be certain of their language requirements and that they have adequate documentation from authorities such as:

(a) When a closure is ordered;

(b) That such a closure is the result of the authority finding that the virus is actually present in the vicinity/location

Thus, closing business as a precaution, without a virus actually being present, may endanger coverage. In this regard, insureds are advised to tread carefully.

(d) Measurement of Trading Losses

Another complication is the measurement of trading losses as Insurers would likely factor in the wider reduction in trade across the country/region and seek to adjust any trading losses of an Insured against the current wider economic downward trends post virus outbreak.


Commercial General Liability Insurances (“CGL”)

In general, CGL policies are comprised of various types, and will respond to pandemic events if the Insured has been negligent in, or found liable for, failing to protect other persons/parties from infection where they have a duty to do so. Such coverage is triggered if liability is legally present or established.

Typically, the wording of the coverage under these policies generally reads as follows:

“Insurers will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury”, “personal injury” or “property damage” to which this insurance applies.”

As can be seen, “Liability” is necessary for this coverage to be triggered. If there is liability, then the policy will respond subject to its limits. Thus, Insureds are encouraged to use reasonable precautions that will decrease liability and/or severity of any loss due to failing to prevent the spread of the disease where the Insureds have a duty to do so.

There are no, usual, exclusions for infectious disease liability under CGL policies (but, of course, individual, particularly manuscript, policies should be reviewed for any deviation from this norm).


Employees’ Compensation (“EC”)

It is expected that courts will endeavour to find coverage where an employee, through no fault of their own, was exposed to the COVID-19 virus at work in a demonstrable way. It is essential that the exposure take place in an employment setting along with the appropriate documentation for the employee to receive medical care and compensation through the EC policy. Thus, coverage may not be afforded under the policy if the virus was contracted elsewhere.


Life Insurance

Bank Negara Malaysia (“BNM”)6 has announced additional measures to support SMEs and individuals by providing deferment of payment of life insurance premiums and family takaful contributions for three months without affecting the policy coverage. This option will be available from 1 April 2020 until 31 December 2020.

Further, in a press statement by LIAM entitled “Life Insurance Companies Offer Additional Relief Measures for Policyholders in facing the COVID-19 crisis7” dated 20 March 2020, LIAM listed several instances of additional benefits of relief measures taken by insurers: –

(a) RM5,000 Cash Relief for customers who are diagnosed with COVID-19;

(b) Cash benefits/allowance for hospitalization (for example up to RM250 per day up to 30 days of hospitalization);

(c) Special lump-sum death benefits (ranging from RM5,000-20,000 upon death of the insured); and

(d) Four insurance companies pledge RM1 million each as part of their financial assistance/support programme for customers affected by COVID-19.

In another press release entitled “COVID-19 Pandemic: LIAM and MTA announce relief measures to ensure policyholder/certificate holders affected by COVID-19 continue to have life insurance/family takaful protection even in the midst of temporary financial difficulties8” dated 27 March 2020, LIAM and MTA also announced several relief measures to ensure policyholders/certificate holders affected by COVID-19 continue to have life insurance/family takaful protection even in the midst of temporary financial difficulties, which are: –

(a) Deferment of payment of life insurance premiums and family takaful contributions; and

(b) Extension of flexibilities to reinstate or preserve life insurance and family takaful protection.

Additionally, life insurers and family takaful operators will also provide the following assistance to the policyholders and takaful participants affected by COVID-19 until 31 December 2020: –

(a) Extending the period during which a policyholder and takaful participant affected by COVID-19 can reinstate a policy/certificate that has lapsed;

(b) Provide options to enable policyholders and takaful participants affected by COVID-19 to continue to meet their premium/contribution payments and maintain their policies/certificates. This may include changes in the sum assured/covered, adjustments to the premium/contribution structure and conversion into a paid-up policy; and

(c) Waive fees and charges imposed for changes made to policies/certificates; and Waive any penalties/consequences for late payments of premiums/contributions, particularly where policyholders/takaful participants affected by COVID-19 are unable to access electronic payment channels during the Movement Control Order.

Several Insurance companies have also taken proactive steps by offering additional complimentary coverage specific to COVID-19, which is appended below9: –

Provider Benefits Eligibility Period
Prudential Malaysia RM5,000 payout upon diagnosis In-force individual policies/certificates 1 February – 30 April 2020
Boost x Prudential Malaysia ·  RM5,000 payout upon diagnosis

·  RM1,000 payout upon death

Verified Boost Premium Wallet users who apply Enrolment until 30 April 2020, limited to first 200,000 enrolments
Great Eastern Malaysia ·   RM20,000 payout upon death

·   Cash assistance of RM200 per day up to 60 days of hospitalisation

·   Life assured policyholders and their immediate family members

·    Open to foreigners although they are required to be kept in quarantine at any MOH designated hospitals to claim for hospitalization cash assistance.

17 February – 31 December 2020, or until the exhaustion of the RM1 million financial assistance provided
AIA ·   RM10,000 payout upon death

·   Hospitalisation benefit of RM200 per day up to 30 days of hospitalisation

Individual Life, Family Takaful, and Flex PA customers Until 30 June 2020
Tokio Marine ·   Set up a “RM 1 Million Covid-19 Financial Support Fund”

·   Lump sum Compassionate Benefit of RM 10,000 additional RM10,000 if the individual is a Front-Line Medical Staff

·   Hospitalisation benefit of RM250 per day up to 30 days of hospitalisation.

·   Life assured policyholders and immediate family members

·   For policy holders only

20 March 2020 – 30 June 2020
Manulife ·   Hospitalisation income support of RM200 per day up to 30 days of hospitalisation

·  RM10,000 payout upon death (RM15,000 for registered medical staff)

· Hospitalisation income support applicable to the insured

·  Compassionate benefit applicable to the insured and immediate family members

26 February – 30 June 2020
Hong Leong Assurance ·  Pledged 1 million for Complimentary Dual Special Benefit Programme

·  Hospitalisation benefit of RM200 per day up to 30 days of hospitalisation

·  RM10,000 paid out upon death

New and existing customers with Hong Leong Assurance medical coverage 28 February – 30 June 2020
Etiqa ·  RM5,000 cash relief upon diagnosis

·  Medical Coverage based on Etiqa plan

Etiqa Life Insurance and Etiqa Family Takaful customers 19 February – 30 June 2020
AXA Affin ·  Hospitalisation waiver assistance (for all AXA Affin medical policyholders)

·  Up to 14 days of hospitalisation income benefit

·  Family assistance of RM3,000

AXA Affin medical policyholders who purchase a Hospitalisation Income Benefit Rider (HIB) during the application period Application period:
1 February – 31 March 2020Cover period:
1 February – 30 June 2020


Impact on Marine Insurance

The Pandemic implications for the shipping industry include crew and passenger health, difficulty with crew changes or the crew refusing to go to an affected area Outbreaks10. There may also be delays at Chinese and subsequent ports of call; cargoes may no longer be available or no longer possible to load or discharge. Even though the International Maritime Organization (“IMO”) is allowing trade in and out of China to continue without imposing direct travel restrictions, this may alter depending on future advice released by the World Health Organization (“WHO”), as well as discretionary decisions being made by individual companies.

Several key issues and potential implications that cargo owners and risk managers need to monitor closely are: (a) Accumulation of Cargo; (b) Delay; (c) Delay Clause; (d) Demurrage Charges; (e) Deviation; (f) Force Majeure; and (g) Interruptions in Transit.

The global marine industry is at risk of significant disruption with Marine Cargo insurance implications11: –

(a) Cargo and stock throughput – expected limited workforce being available at all key points of the supply chain will reduce capacity to distribute and handle goods. Cargo is also envisaged to be held for a longer duration at ports and for storage locations to see a volume increase whilst stocks await their next destination.

(b) These areas raise the limitations of cover of the normal marine cover:

  • Delay – although many will want to keep their cargo moving to prevent any obstacles on trading, we must be mindful that a delay during the ordinary course of transit or whilst the goods are in storage could soon be inevitable. Most cargo and stock throughput policies exclude loss or damage solely caused by delay.
  • Additional costs/charges – experiencing hold-ups or re-routing goods to an alternative destination due to government prohibition will incur an additional cost. Although these costs are usually sub-limited, the additional forwarding costs clause; or similar, will provide extra financial support should you experience added expenses on top of the usual outgoings.
  • Vulnerable goods – perishable items such as pharmaceutical products and food produce operate on a stringent and well-monitored time schedule. If your goods are prone to temperature sensitivity or have a short shelf life. The normal cover for marine insurance does not cover inherent vice and delay, both will operate when ports are congested and cargo clearance are delayed in the current Pandemic outbreak.



This is the time for insurance sectors to review and update their crisis management plans and take steps to continue operations with a minimum of disruption to clients.

It is imperative that policy holders seek advice and conduct a review of their policies and consider whether additional cover need to be obtained. The Pandemic has wrought irreversible changes and as insurers learn and adapt, policy holders cannot be complacent. Insurance will be a key tool for businesses to recover and survive in the post Pandemic era, which cannot come soon enough.





Written by:

Philip Teoh (Partner)
Shardha Lim Yuet Ying, Jacintha Sasidaran, Nur Amalina Azami & Demetria Rinesha Samuel (