Insurance Information Bureau



Isaac Nga’ru
Founder & Executive Director 
Insurance Information Bureau


Ever since the World Health Organization (WHO) declared COVID-19 as a global pandemic on March 11, 2020, businesses and individuals have suffered huge losses and insurance claims are at an all-time high. The world has seen other epidemics like Spanish Influenza, SARS, Yellow Fever, Ebola, etc. all of which caused economic losses. So businesses can take a pandemic insurance policy or at least add specific clauses covering losses due to epidemics into their policy.

However, Pandemic insurance policies have huge premiums, and therefore, many insured do not opt for such policies. For example, Forbes reported that after the outbreak of SARS in 2003, the All England Lawn Tennis and Croquet Club had taken a pandemic insurance policy by paying a premium of $2 million every year and thus they will be able to recoup almost half of the losses due to cancellation of the Wimbledon Championship this year.

Many policies contain a force majeure clause which excludes pandemics. However if there is no specific clause excluding viruses or infectious diseases, then the insured can recover losses under such a policy. A suit on this ground has already been filed by a group of Chicago restaurant and movie theater owners i.e. Big Onion Tavern in federal court against Society Insurance Inc, a Wisconsin-based insurance company. They allege they have suffered losses due to closure of all restaurants, bars and movie theaters by authorities due to the pandemic. Since their insurance policy does not contain virus or pandemic exclusion, they say that their claims are valid.

For health and life insurance policies, the Insurance Regulatory and Development Authority (IRDA) of India has issued guidelines which call upon insurers to settle all claims related to COVID-19 responsibly. However, there are certain exclusion clauses which can prevent a successful claim:

  1. The standard exclusion as set out by IRDA in its guidelines for standardized exclusions in a contract exclude any unproven treatment for which there is no medical record or study. At present, there is no proven medical treatment or vaccine prescribed for treating COVID- 19 patients and the claim can be rejected on this ground.
  2. The contract may exclude claims of a person infected with COVID-19 if he or any of his family members have recently travelled to COVID-19 affected countries like China, Italy, etc.
  3. A claim may be rejected if a person contracts COVID-19 during the policy waiting period, which is generally 30 days after the issuance of policy.
  4. A claim may not be allowed if an insured was not hospitalized for 24 hours or more.

These are just a few examples, but they can be resisted by the main purpose rule, which lays down that wide exclusion clauses will be read down to the extent to which they are inconsistent with the main purpose, or object of the contract.

Here in Kenya, we can benchmark with other places like in India, but at the interval, we could look at areas of quick convergence with one eye on long term solutions. Flexibility in dealing with clients‘emerging financial and emotional needs through options such as premium relief, extended grace periods, securing additional protection with minimum underwriting, and adjusted internal administration, operating systems to process business quickly; as well as offering self-service capabilities to clients through:

  • Operational efficiencies
  • Workforce transformation
  • Optimization of existing and uptake of new technology as is needed
  • Embedding resilience and enterprise risk management transformation
  • Embracing and or imposition of additional regulatory requirements
  • Rise in insurance risk , capital and solvency
Scroll to Top