I would imagine it's similar to all insurance: there are events outside the scope of your agreement with the insurance company for coverage.
For example, your home insurance would cover your house burning down but might have a clause along the lines of "if the whole town burns down, we will not cover you."
I'm guessing some health insurance plans have a similar clause of "if there is a WHO declared pandemic, we won't cover you".
The fire example from a real historical event: a German city burned to the ground and put multiple insurance firms out of business. This led to the development of "re-insurance" aka insurance firms that insure other insurance firms.
> For example, your home insurance would cover your house burning down but would have a clause along the lines of "if the whole town burns down, we will not cover you."
This isn't true. Insurance companies can and do regularly cover people in areas where massive destruction occurs within a particular area (e.g. hurricanes). This is why some companies no longer write policies in certain areas: their risk managers usually require them to "spread out risk" and so they write some stuff in some areas and then they may stop and lower rates elsewhere which are deemed "lower risk".
EDITED: Actually, some companies will even cover you in some pretty extreme circumstances, but this is stuff you have to pay for extra and isn't usually included on most policies.
At any rate, what _is_ true is that most insurance companies won't cover you based upon the cause of something: e.g. if your house is burned down due to a riot "civil unrest" or because of something like war, it will not cover you. If your house floods because a pipe bursts, then it is OK. If water comes up from the ground (i.e. a _real_ flood) then it will not cover you because it looks not only at what happened but how it happened.
We are both correct in that they can do all/some/none of the below:
1. Structure their agreements so that some things are covered and others are not e.g. suicide is sometimes NOT covered for life insurance
2. Choose not to cover certain areas e.g. there were insurance firms choosing not to cover Staten Island even pre-Sandy
3. Set their rates at high levels to discourage people e.g. this happened in my old town house where there were too many claims based around water heaters leaking
Funny side story: I remember reading a book about the British Special Forces (S.A.S.) and there was a note that said only Lloyd's of London was willing to insure them due to the high risk of injuries from their line of work.
Funny side story #2:
One of my family members had a friend who was apparently a crazy driver. He drove a delivery truck so a bunch of the driver's friend (including my family member) took out a life insurance policy on him (driver). I didn't even realize you could do this but apparently you can.
In the end, turned out that the driver outlived all of the people who were on the policy!
>One of my family members had a friend who was apparently a crazy driver. He drove a delivery truck so a bunch of the driver's friend (including my family member) took out a life insurance policy on him (driver). I didn't even realize you could do this but apparently you can.
It's generally restricted, since it can incentivize killing them to collect the money. To life-insure anybody you have to convince the insurer that you have an "insurable interest" in their life. That's easy if they're a breadwinner/caretaker in your family, and you could also show it if they were e.g. critical to your business (edit: or had lent them money). I'd be interested to know what the justification was in that case.
Insurers really try to make sure that the payout isn't so high that you want the insured event to happen ("moral hazard").
Hm, I think the "insurable interest" check is more of a standard practice to protect against being exploited by criminals and less of an "oh man, we'd love to do that but for those pesky regulations". Still, if I had to guess, I'd say it's that they don't look too closely if it's a close-enough family member that has a job.
I would assume there are many insurance plans that include force majeure clauses. "Force majeure – or vis major – meaning "superior force", also known as cas fortuit or casus fortuitus "chance occurrence, unavoidable accident", is a common clause in contracts that essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as a war, strike, riot, crime, or an event described by the legal term act of God, prevents one or both parties from fulfilling their obligations under the contract"
TLDR: If the event affecting you gets big enough/outrageous enough the insurance companies consider it an act of god and you aren't covered.
In English law I think that this kind of clause has to be explicit and something that all parties sign up to - because the principle in English law is that parties can contract freely in any form that suits them. In other systems (and I think in the US - please correct me anyone who knows more!) you don't need an explicit clause to argue force majeure, you just need to get the court to agree that you are in extraordinary times.
I'm not familiar with how the US system works but that seems... strange. Why would the WHO declaring it a pandemic affect your coverage?