From 2022, Lebanese insurers will collect premiums on health insurance in ‘fresh dollars’ only as the sector has been struggling to cope with the collapse of the Lebanese pound since 2019, said the Association of Insurance Companies in Lebanon (ACAL).
The new payment mode will be applied to new policies and when existing policies expire.
The term ‘fresh dollars’ refers to amounts denominated in US dollars that are injected into the Lebanese banking system received either in cash or via international wire transfers after the October 2019 public protests that forced Lebanese commercial banks to close for an unprecedented two weeks.
“From 2022, all insurance premiums will be calculated in fresh dollars or the equivalent in Lebanese pounds at the rate in force on the day of payment,” said ACAL president Elie Nasnas, according to local media reports.
Some insurance companies are already implementing such a payment system, the main reason being that hospitals now ask for payment in dollars and in cash so that they could in turn pay their staff. Faced with a wave of staff resignations, the hospitals are resorting to this measure. The high rate of inflation, due in a significant part to the depreciation of the Lebanese currency, has also pushed up medical costs.
For the insurance industry, there is an added complication in that they face difficulty transferring funds abroad to pay foreign reinsurers.
Mr Nasnas said that most insurance companies have begun charging policy premiums in fresh dollars. Several insurance companies have changed their strategies and introduced some new insurance products that provide limited services to customers at a cheaper price with a flexible payment method.
Plunge in value of the Lebanese pound
The Lebanese pound was trading at around 24,200 to $1, exceeding an all-time low of about 24,000 reached in July, reported Reuters. The currency has now lost more than 90% of its value since summer 2019. The official exchange rate has been set at around LBP1,507.5 to the dollar since 1997.
Setting out the government’s position on premium payments, Lebanon’s economy minister Amin Salam said in an interview with Ici Beyrouth, “Insurers do not have the right to modify the conditions of a current contract and must honour their commitments to the insurer until the expiry of these policies.
“There is not yet a uniform rule common to all insurance companies concerning the methods of payment of the premium. These (payment modes) are specific to each company. Our role is to ensure that these companies do not take advantage of the economic imbalance to impose unfair clauses.” M