ARTICLES

The Covid-19 pandemic has had a huge impact on the entire economy impacting businesses across the globe and the entire society as a whole. However, the impact on the insurance industry has been the highest, although the insurers have been very responsive and handled the situation well.

Rise of health claims and rise in premiums 

There may be an industry that didn’t get affected by Covid-19. This pandemic has taken innumerable lives in just a span of the last 1.5 years. The insurance industry felt the direct effect, where the number of claims due to Covid-19 increased from 33% in FY 2020-21 to 48% in FY 2021-22.* The total number of claims in FY 2020-21 for Coronavirus cases was around 986366, which increased to 1229538* in this fiscal year. The health insurance sector is in trouble in settling this massive number of claims. Within just five months of FY 2022, the number of health claims due to Covid-19 stood at Rs. 13804 crores.* Out of which only Rs. 9,178 crores* have been settled. The rising number of claims due to covid-19 has made many health insurers increase the amount of premium.* 

Introduction of new standardized health plans 

On the other hand, due to the rising concern related to covid-19, IRDAI* has provided guidelines to introduce short-term health insurance policies that will cover the cost of treating Covid-19. The short-term health insurance plan acts as a boon to increase financial outreach and health insurance penetration, especially in the country’s rural belt. 

Telemedicine in Covid-19 treatment

Another impact of Covid-19 on health insurance and the overall healthcare industry is the introduction of widespread awareness of telemedicine. Earlier, very few doctors used to provide consultation over the phone or the internet. However, with a nationwide lockdown and social distancing norms, doctors are now available over mobile phones and the internet.

Demand for higher SI (sum insured) for health

The amount of sum insured in case of health insurance has almost doubled in this one year. While the average sum insured was Rs. 11.4 lakhs in FY 2020, it has risen to Rs. 22.42 lakhs in FY 2021.* This has positively affected the health insurance sector as the premium has also increased with higher sum insured. 

The rise in life insurance demand 

There has been a rise of 30% in buying life insurance,* especially people aged between 25 years to 35 years from the previous quarter. The rising number of deaths due to Covid-19 has impacted the young adults who were earlier most negligent about buying life insurance. Covid-19 has made all understand the uncertainty of life and the importance of life and health insurance. 

Motor vehicle premiums dipped, hence the "Pay-as-you-drive" model became more popular

The “Pay-as-you-drive" motor insurance is a plan wherein the premium is not fixed at the beginning of the policy year but is charged as per the usage of the vehicle. Distance travelled by the vehicle is determined with the help of a Telematics Device installed by the insurer and the premium would be chargeable accordingly.

However, the overall automobile industry had dipped in 2020 with a significant fall by almost 18%* which is probably on a rise now. Thus, with the slowdown of the new automobile purchase and physical travel restrictions, new motor insurance policies, as well as renewals, have also dipped. Even claims have been impacted as the survey* process could not be done due to a countrywide lockdown. However, since very few vehicles were plying on the road, the incidence of claims was also low. Now, with social distancing, people have started using their own vehicle rather than public transport, thereby increasing the possibility of growth in the automobile industry. This could revive the motor insurance industry as well!

While the effect on life insurance and health insurance companies or the industry is mixed as there are certain benefits and losses due to Covid-19, the motor vehicle insurance sector is in deep trouble. In April 2020, the sales of motor insurance dipped by 49%.*  It is one of the most affected parts of the insurance industry in this lockdown.