HOW IS COVID 19 IMPACTING LIFE AND HEALTH INSURANCE COMPANIES IN INDIA

The corona virus pandemic has claimed the lives of almost 82,000 people worldwide with close to 14,00,000 active cases on a global scale as on 8^th April, 2020.  India is hanging delicately in between the unpleasant exit from stage 2 and outbreak of stage 3, there are 5,200 approximate cases of COVID 19 in India with tally of deaths crossing the 150 mark in India and an addition of roughly half a thousand on a daily basis.

The ramifications of the pandemic can be felt in every sector of India, the insurance sector which is a 200 billion dollar industry in India is not untouched by the COVID 19 global pandemic.

The claims hitting the insurance industry from the COVID-19 outbreak will be coming across a range of products.

 

Challenges faced by the insurance sector during the corona virus outbreak

• Decline in inflow of premium

A year which could have been stupendous year for life insurance industry in terms of business premium growth is suddenly staring at a situation where matching the last year figure seems a daunting challenge.

Due to the lockdown in critical second half of March, 2020 the premium collections suffered significantly.

• Life Insurance stares at death claim challenge           

Besides the loss of new business premium, the industry is staring at a challenge of increased death claims. Though government has acted proactively and gone for a complete lockdown of 21 days even before the number of death toll entered triple digits. Talking about life insurance policies, a number of establishments will continue to honor the claims on existing policies however; the cost of future policies will witness a surge.

• Health Insurance to go through corona test    

Health Insurance segment has been one of the brightest spot in the general insurance category. Corona is going to the biggest challenge the industry has seen so far. The disease has pan-India spread and there is very real risk of it spreading exponentially. Treatment of COVID-19 may need prolonged hospitalization which could be costly. Despite this there are many health insurers.  have come forward and clarified that they are still providing cover for corona virus. This means the future course of corona virus will decide the level of challenge health insurers face. “Since, it has been announced that if there are any claims due to corona virus, wherein the case is of hospitalization for at least 24 hours, it will be covered under a health policy as per the contract.

• Less focus on profit making and innovation and need to robustly develop to cope up with the huge incoming volume of claims and regulatory mechanisms.

The cost of treating COVID 19 is expensive due to the anti virals, ventilators, and personal protective equipment kits (PPE) and separate wards. COVID 19 treatment is expensive in most cases, but the real worry for the insurance companies is going to be managing the volume. Even as the government has allowed the private sector to treat patients, it will have to step in to subsidize the cost else private treatment can become unaffordable for the uninsured. Moreover, the premiums for the said policies are to be approved by IRDAI who would take a beneficial approach for the protection of rights of policy holders. The policy holder protection committee specifically undertakes to the said task. Malpractices if any, by any insurer would be severely punished.

Moreover, in working with the changing environment the insurance companies would have to work by keeping general public welfare in foresight and profit making in the hind sight.

• Operational Challenges

Since the pandemic is unprecedented and developing policies for the same is a task in itself. There is a ever increasing demand in the health insurance, term life plans and travel polices that provide cover from COVID 19.

Since, due to economic crunch of the general population, the premiums are to be reasonably priced (with increased cost of treatment) and attached benefits of the policy can not be limited in nature of coverage extended.

Hence, by a cost benefit analysis of the same, the insurance companies are  more likely to suffer loss on this front.   

Moreover, the underwriting departments of the companies are already overburdened to ensure business continuity and in addition to the same, they are asked to shoulder another responsibility of making a beneficial policy that too within short periods of time. On top of that the problem of inadequate man power and difficulty to access resources during the pandemic are affecting the routine life already.

 

Regulatory Mechanisms undertaken during corona virus outbreak in India by the IRDAI

The Insurance Regulatory and Development Authority of India (IRDAI) through circular dated 04/03/2020 ( a week before the COVID 19 was declared a global pandemic) issued Guidelines on handling of claims reported under Corona Virus, which are as produced as follows :-

In respect of the products filed and cleared as per the provisions of guidelines on product filing in Health Insurance Business (Ref: IRDA/HLT/REG/CIR/150/07/2016) dated 29^th July 2016, where coverage is granted for treatment of hospitalization expenses, in order to alleviate the hardships that may be caused to the policyholders, all claims reported under corona virus shall be handled as per the following norms.

1. Where hospitalization is covered in a product, insurers shall ensure that the cases related to Corona virus disease (COVID-19) shall be expeditiously handled.
2. The costs of admissible medical expenses during the course of treatment including the treatment during quarantine period shall be settled in accordance to the applicable terms and conditions of policy contract and the extant regulatory framework.
3.  All the claims reported under COVID 19 shall be thoroughly reviewed by the claims review committee before repudiating the claims.

 

 In order to provide need based health insurance coverage, insurers are introducing products for various specific diseases including vector borne diseases. For the purpose of meeting health insurance requirements of various sections, insurers are advised to design products covering the costs of treatment for Corona Virus.

 

•  These instructions are issued under the provisions of Section 14 (2) (e) of IRDA Act, 1999 and shall come in to force with immediate effect.
•  This has the approval of the competent authority.[1]
• The Insurance Regulatory and Development Authority (IRDAI) has asked insurers to process COVID 19 claims expeditiously. Insurers are encouraged to adopt simplified claim procedures for such cases. In addition, other claims should also be processed within prescribed period by making special efforts,” the regulator said in a circular. It also asked insurers to display FAQs for COVID 19 claims on their websites.
• Insurers should set up a crisis management committee comprising key personnel to monitor the current situation on real-time basis and to take appropriate decisions on issues pertaining to the safety of staff, policy holders, intermediaries and agents.
•  Insurers should also put in place a business continuity plan, a copy of which should be submitted to the authority.  
• The insurance regulator IRDAI on 31/03/2020 has issued COVID 19 related instructions to insurance companies, said that they may allow travel insurance policyholders to extend the start/end dates of policies valid between March 22, 2020, and April 30, 2020.

 

This means that policyholders may soon get an option from insurers to extend their travel insurance policy dates without paying extra charges to ensure that the impact of the corona virus pandemic on their travel plans and finances is cushioned.         

The Life Insurance Council of India has announced that all life insurance companies, both public and private, will process all corona virus-related death claims, at the earliest. The Council also confirmed that the clause of ‘Force Majeure’ will not apply in case of COVID-19 death claims.

This means that the death claims due to COVID 19 will be entertained by the insurers , provided policy holders declares all the material facts correctly.

 

Response from the Insurance Companies

According to a press release from the Life Insurance Council, “The Council also confirmed that the clause of ‘Force Majeure’ will not apply in case of COVID-19 death claims. This step was taken to reassure customers who had reached out to individual life insurance companies seeking clarity on this clause in their contract as well as to dispel rumours to the contrary. All life insurance companies have also communicated to their customers individually in this regard.” All life insurance companies, including public and private, will process any death claim pertaining to Covid-19 at the earliest.

As a part of the regulator’s Sandbox product approval guidelines, Go Digit General Insurance has launched a fixed-benefit cover for corona virus. With a choice of coverage up to Rs 2 lakh, the policy covers ongoing treatment where if the test for COVID-19 is found positive from any of the authorized centres of ICMR – National Institute of Virology, Pune, the insurer will give the policyholder 100% of the sum insured. There is no need to wait for the completion of treatment.

In case of quarantine cases, if the policyholder is quarantined in a government or military hospital for at least 14 consecutive days, the company will pay 50% lumpsum of the sum insured. This is applicable even if the test result is later negative as it covers the screening and treatment costs. The premium for Rs 2 lakh cover (irrespective to age) is Rs 2,027 plus GST.                                    

However, the policy will not be applicable if a person has travelled to countries such as China, Japan, Singapore, South Korea, Thailand, Malaysia, Hong Kong, Macau, Taiwan, Italy, Iran, Kuwait and Bahrain since Dec 1, 2019. The policy will not cover those above 60 years of age and the policy is terminated after payment of 100% sum insured.

 

Steps to be taken by the insurance companies to minimize losses during COVID 19

• Extensive and continuous co operation

A lot of co-operation between the IRDAI, insurers, network hospitals and intermediaries for standardization in COVID-19 claim settlements to meet the needs of the country.

• Focus on long term objectives and not on short term profits

With an economic slowdown bound to follow after the lockdown and a due time for the normalcy to prevail again, the insurers must focus in compliance of welfare regulations of the IRDAI during lockdown and for a quarter or so after the lockdown which can be gradually made up later, so that the cost of premiums do not increase and cause burden upon the prospective and existing consumers and the cost of buying insurance does not increase in the country. Resulting into  further decline of insurance sector solely because of affordability by the masses.

• Digital savvy companies will minimize losses

Though insurance offices are included under the list of exempted services under the lockdown however with general restriction on movement there is hardly any chance of new business. “Insurance players with robust digital infrastructure should fare better than others, if there is a sharp rise in COVID-19 cases. One of the biggest challenges for insurers could be enabling alternative work arrangements for their employees and sales force such that they are more resilient and able to deal with increasing claims and shorter response times

 

Conclusion

With a sudden surge in demand of the health plans and term insurance plans covering COVID 19 this is a chances of increasing the premiums by the insurance companies. Since the polices are only available through online modes and through web based aggregators  who deal in selling insurance plans, there is a chances that the insurance companies can record profits and there can be a windfall for the gains of the companies.

But the whole situation would also be monitored by the IRDAI who will more actively supervise the whole scenario, hence leaving the companies no alternative but to focus on public policy rather than profit making, capturing market share and innovation.

Hence, in the current scenario when the urgent need of the people to ensure survival will end, the vitality of insurance would be understood like bread and butter in daily life.

Once, the short term goals are met, then the demand of insurance will rise. It implies, a slow down for the insurance industry in the near future after lifting of lock down but windfall gains in the long run.

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[1]Passed by Sh.  D V S Ramesh, General Manager (Health) of Insurance Regulatory and Development Authority of India (IRDAI).

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