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health as it happens

Insurers may hike premiums soon to offset rising Covid claims impact

Written by George Mathew

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Mumbai | July 26, 2021 3:00:04 am

Pre-Covid, the number of people who had any medical condition with themselves or family members in the past six months would have been small.

The health insurance segment, which witnessed a 30.9 per cent jump in the June quarter, and term cover plans of life insurers are likely to witness a spike in premium in the next couple of months in the wake of huge claims and losses, amid the Covid pandemic.

This year, life insurance Covid claims have seen a jump of 4-5 times when compared to the last year. “As a result, insurance companies have experienced losses, with even big ones that were making profits for 10 years in a row. Health claims have also shot up with the Covid second wave hitting insurers hard,” said an insurance source.

“With the third Covid wave expected any time, prices will be rising again for sure. There is no way insurance companies will be able to sustain at current prices as the provisions made were getting exhausted in the second wave itself. The rise will be different for various companies and segments,” he said. “I have burnt fingers in the Covid health claims,” said an official of a PSU general insurer.

On the other hand, selling insurance, especially term cover, has become an issue during lockdown periods. “During the lockdown period, insurers were not able to send people to the laboratories or hospitals to do medical examinations. Insurers were unable to send the technicians to the homes of the customers to fulfil the medical examination. The demand has risen and people want to buy policies, but the fulfilment has been slow,” said an official.

Despite all the hiccups, the demand for health policies has been rising as never before. The health segment has grown by 30.9 per cent to Rs 17,497 crore in the June quarter of FY22 which is significantly higher than the growth of 7.4 per cent witnessed in the same period of last year when there was a nationwide lockdown. Incidentally, the premium growth of standalone health insurers has been higher than industry average in the first quarter. Prior to the Covid-19 pandemic, motor insurance segment had the largest share of the non-life insurance premium, a significant section of which has been ceded to the health segment. Standalone private health issuers have reported a sustained premium growth of Rs 1,556.9 crore in June 2021, demonstrating a growth of 46.6 per cent.

Explained

Health gains at motor’s expense

The premium growth of standalone health insurers has been higher than industry average in the first quarter. Prior to Covid, motor insurance segment had the largest share of the non-life cover premium, a significant section of which has been ceded to the health segment.

“The non-life premiums are expected to be driven by the continued uptick in the health segment. Further, enhanced digital solutions complemented by the offline offerings are expected to drive premium growth of the non-life companies. Meanwhile, the loss ratio could go up given the resurgence in Covid claims thereby impacting the financials,” said a Care Ratings report. However, with Covid cases and deaths rising, insurance companies have, of late, turned cautious with some of them demanding vaccination certificates and stricter medical check-ups.

Pre-Covid, the number of people who had any medical condition with themselves or family members in the past six months would have been small. Given the way Covid cases have risen, this number has automatically moved up now because many have turned positive in the recent months. As a result, the proposal for term insurance gets into the zone of scrutiny where additional medical tests are asked for or might get postponed for 3 months.

As of June 22, of 55,276 claims intimated to the insurance firms, nearly 88 per cent — 48,484 claims — amounting to Rs 3,593 crore were settled.

On the other hand, insurance companies have settled about 80 per cent — over 15.39 lakh — of health claims exceeding an amount of Rs 15,000 crore as of June 22. Over 19.11 lakh Covid health claims were reported as of June 22 as far as medical insurance or hospitalisation is concerned.

The repudiated claims for health cover are just about 4 per cent, while, in life, it is just about 0.66 per cent, which is negligible.

Meanwhile, the non-life industry has continued its FY22 journey on a positive note. The June quarter growth was driven by the private sector that grew at a much faster pace — growth of 17.6 per cent in Q1 of FY22 — compared to the public sector (growth of 9.1 per cent in Q1 of FY22). The non-life premiums are expected to be driven by the continued uptick in the health segment.

Further, enhanced digital solutions, complemented by the offline offerings, are expected to drive premium growth of the non-life companies. Meanwhile, the loss ratio could go up, given the resurgence in Covid claims thereby impacting financials.