In recent weeks, the outbreak of Covid-19 (previously known as ‘coronavirus’) has made headlines around the world.
By mid March, the World Health Organisation reported that there had been more than 110,000 reported cases globally, with more than 4,000 deaths. With outbreaks recorded in locations as diverse as Austria, Iran and Singapore it’s clear that the virus is continuing to spread, with the World Health Organisation declaring the outbreak a pandemic.
With quarantine procedures, travel bans and other measures already in place, here’s how Covid-19 is having an impact on financial services and products.
Global stock markets fall on virus fears
Fears for a slowdown in the global economy because of the coronavirus has seen the FTSE 100 index fall. In the last week of February, the index fell by 11%, wiping around £200 billion off the value of the UK’s top companies.
Michael Hewson, chief market analyst at CMC Markets UK, says: “What we appear to be seeing is the realisation that global economic growth could well come to a halt as the combined effects of a flu virus and belated attempts to stem the spread of it across the globe raise the prospect of an economic sneeze, as consumers stop spending and supply chains seize up due to workers and consumers staying at home.”
In the short term, this could mean a fall in global markets as businesses cut sales and profit expectations.
The International Air Transport Authority has warned that the hit to demand could cost airlines more than $29 billion this year, while companies as diverse as Virgin, Danone and Diageo have already stated that they expect sales to fall significantly. The drinks giant has predicted that earnings could be dented by as much as £200 million.
While there may be a short-term impact, it’s important to remember that investing is generally for the long term. As a recent briefing from Tatton says:
“This bout of volatility will take some time to pass, and further stock market falls are certainly possible, even likely given the nature of the newsflow.
“However, there is good medium-to-long-term potential for stocks. Developments may well be positive rather than negative (perhaps the arrival of an effective drug) and trying to time any risk reduction (and increase) threatens to destroy value for investors rather than protect them.”
You should remember that:
- Your goals are likely to be the same as they were a week or a month ago. Our investment strategies are designed with the long term in mind, and this naturally considers periods of both positive and negative returns.
- You have a diversified portfolio. The fall in the value of the FTSE 100 is not the same as the fall in the value of your portfolio. Our clients have diverse portfolios that include exposure to other asset classes, for precisely this type of situation.
- Selling after a downturn means you turn a paper loss into a real loss. According to JP Morgan, an investor with $10,000 in the S&P 500 index who stayed fully invested between January 4, 1999, and December 31, 2018, would have about $30,000. An investor who missed 10 of the best days in the market each year would have under $15,000.
Travel insurance may only cover you in certain circumstances
As of late February, the Foreign and Commonwealth Office has only issued travel advice for China. This means that only Brits travelling there or through there will be eligible for refunds from a travel operator.
Indeed, if you travel to a country or region against government advice, your travel insurance may be invalidated.
‘Not wishing to travel’ is not covered by most travel insurance companies. Consumer group Which? say that, as there has been no official advice not to travel to areas such as Italy, you will not automatically be eligible for a refund of your trip if you decide not to visit because of the outbreak.
Your travel insurance policy may cover some out-of-pocket expenses, and also help you to leave the area and return back to the UK if you are advised to do so, and if you can’t get help from other sources. It may also cover non-refundable cancellation costs, in specific circumstances, such as medical advice against you or a member of your party from travelling or government advice against travelling.
What coronavirus means for life, critical illness and income protection
In the unlikely event that you were to die from the coronavirus, your life insurance policy would be expected to pay out.
Similarly, if you contracted the virus and you were not able to work as a result, you could expect your income protection to cover you. Bear in mind that there may be an excess period (typically 4, 8 or 12 weeks) on income protection, so any payments would only begin once you had been unable to work for longer than the excess period.
When you protect yourself using a Critical Illness policy, your specific policy details will outline exactly which conditions are covered.
This means that it is unlikely that you could make a successful Critical Illness claim if you contracted coronavirus, as it won’t meet the illness definitions under your policy.
If your Critical Illness policy includes death benefit, then it would pay out in the unlikely event that you were to die from the coronavirus.
What to consider if you’re currently taking out new protection insurance
If you are currently applying for life or health insurance, and you are planning to travel to an area that has been affected by the coronavirus, your application could be postponed.
Protection expert Emma Walker told Cover magazine: “When applying for protection insurance it is common to be asked about travel abroad and if someone is being investigated for coronavirus or has travelled to Wuhan recently, the application is likely to be postponed.
“While no UK life office has confirmed it is planning to change its application questions or underwriting as a result of the virus, recent travel to certain countries will continue to trigger a referral for an underwriter to review the application.”
Get in touch
If you have any questions about how the coronavirus affects your finances, please get in touch. Email firstname.lastname@example.org or call (0161) 8080200.