The insurance sector faces the worst of these pandemic situations. With an increase in the number of COVID cases in India that rose to 818k, the insurance claims see its abrupt increase. Maharashtra and Delhi being the worst affected by the pandemic with the highest number of COVID cases, imparts more stress in the insurance sector.
It was instructed by IRDAI to accept claims for COVID-19 cases under active health insurance policies. Even though insurance companies had enough capital available that would enable the insurer to pay out claims from COVID, the insurers have started to feel the stress due to the escalation of claims in a month. The claimed amount tripled to more than Rs.562 crore in less than a month from Maharashtra and Delhi. The number of claims also tripled to 35,000 from 11,000 in a month.
From the records, Maharashtra reported 15,753 claims worth Rs.195crore, followed by Delhi with 5,909 claims worth Rs134 crore. Tamil Nadu, Karnataka, Haryana, and West Bengal being other states with a higher number of claims. Even though the average claim amount increased from Rs.1.56 lakh to Rs.1.64 lakh the average settlement reduced from Rs.90118 to Rs.80427. This reduction is an indication of lower pay-outs received by policyholders even after an increase in the COVID-19 treatment costs. The variance in the amount claimed and settled is due to the difference in pricing of treatment by hospitals and the scope of coverage of standard health insurance policies. Most policies do not cover the cost of personal protection equipment, included in the patient’s bill.
New Insurance Products
Insurers are directed to make coronavirus specific insurance products by the regulator. It’s seen that due to the uncertainty of the coronavirus cases and claims, insurers are unable to price the product and some of the private insurers have not yet filed their products with the insurance regulatory and development authority of India.
Even when some of the insurance companies have come up with COVID-19 insurance products, the biggest challenge is unlike other diseases this does not have a fixed treatment cost, data related to patient profiles, etc. which is required to underwrite the risk and to decide the premium for products, companies are constantly under the risk of overpricing or under-pricing the product. As the costs differ from state to state a state-specific premium is not possible.
From the regulator’s standard COVID-19 guidelines insurers are ordered to develop both short term cover as well as fixed benefit cover with a sum assured limit of Rs.5lakh and Rs.2.5lakh for hospitalization.
