As Covid-19 vaccination slows down, insurers insist customers take jabs

Only 3.2% of India's population has been fully vaccinated with two shots

India is running short of Covid-19 vaccines, but insurance companies are insisting customers take the inoculation. Some health insurance firms are offering discounts to customers who have taken a jab.

Tata AIA Life Insurance Company has made its mandatory that anyone planning to buy a term insurance policy should get both the doses of vaccine. Reliance General Insurance is offering up to 5% discounts for vaccinated customers who wish to buy a health cover.

“This information doesn’t capture facts. To ensure the highest degree of financial protection to our policyholders, we ensure their interests are protected at all times. Accordingly, our underwriting practices reflect the emerging realities and continue to remain prudent,” said a spokesperson for Tata AIA.

Insurance reach in India is abysmal. The latest Economic Survey showed penetration in the non-life segment slipped to 0.94% from 0.97% in 2018. The life insurance segment did marginally better, with penetration at 2.82% from 2.74% in 2018. Insurance penetration is calculated as a percentage of insurance premium to gross domestic product (GDP).

India’s vaccination drive is running slow. Only 3.2% of the population has been fully vaccinated with two shots, while 2.4% has got the first one. Some states have halted vaccination for the 18-45 age group due to shortage, as many older than 45 have not got the second shot.

“The insurance companies are trying to improve their underwriting. At the end of the day, it is about fair pricing of risk. They are trying to get as much as data as possible to price the product,” said Nischint Chawathe, Director, Kotak Institutional Equities.

Read More: Second wave of Covid-19: Rising death claims keep insurers on tenterhooks

“It is quite possible that insurance companies, particularly health insurance companies, are getting higher claims after the pandemic broke out,” he added.

For the fiscal year ended March 2021, health reported one of the highest growth among all lines of business. Growth was mostly driven by a sharp increase (38.1%) in retail health business, according to a report by AM Best, a company that provides credit ratings and financial data products and services for the insurance industry. One of the factors behind this robust growth is the Covid-19 pandemic.

According to a note by ICICI Securities, the general insurance company’s cornavirus-related claims went up as high as $ 374 million in September 2020, when the first wave was at its peak. The claims remained at an elevated level in October, November and December--$ 305 million, $ 249 million and $ 312 million respectively--before coming down to $169 million in January.

Experts said the insurers expected claims to rise in the second wave of pandemic also which may have prompted them to insist for vaccination before offering a policy.

Most of the insurance companies have increased the waiting period for issuing a policy in case the person was infected – to three months, from one month.

Insurers started insisting on vaccination after the industry regulator said that it has received complaints that companies are not issuing Corona Kavach and Corona Rakshak policies. The Insurance Regulatory and Development Authority (IRDAI) clarified that all general and health insurers are mandated to offer these policies.

“… all insurers, as applicable, were advised to continue offering Corona Kavach and Corona Rakshak Policies and also to renew these policies,” IRDAI said earlier this month.

So far as health insurance is concerned, though India’s state-run insurers account for the lion’s share of the health segment, standalone health insurers and private insurance providers have also expanded aggressively.

The AM Best report observed that over the last decade in particular, standalone health insurance companies recorded a robust CAGR of approximately 30.0%, which was much higher than that of the PSUs (<20%). The standalone health insurers make up about 26% of the Indian health insurance market, which is a significant increase from less than 10% a decade ago.