Low premiums make firms wary of Covid-19 pandemic covers, say experts

Some insurers are reluctant to offer standard Covid covers, say industry experts, as cases rise at an alarming rate, making such products unviable for them, especially given their low premiums. This comes a day after the regulator advised insurers to not deny such cover to consumers hit by a devastating second wave of Covid-19.

In a statement on Monday, Irdai said all general and health Insurers are mandated to offer Corona Kavach and Corona Rakshak policies. 

A senior executive with a private insurance firm said when these products were introduced last year, insurers sold them to help people get cover against Covid. But they are not very enthusiastic about selling them for a second time.

Because these were short-term products, insurers priced them as such. But now they may have to revisit their stance on pricing. The loss ratio has been adverse on these products. Also, some insurers are of the opinion these policies are undercutting their comprehensive products.

He said, “The stance on coverage under such products will vary from insurer to insurer. Some may have decided to go slow on such products.”

Since their launch in July last year, these covers have generated strong sales, which started slowing towards the end of FY21. Till March 2021, the standard Covid-specific indemnity-based policy Corona Kavach has covered 4.2 million lives. Similarly, the standard benefit-based product Corona Rakshak has covered 540,000 lives. And, all Covid-specific policies together have covered more than 13.5 million lives.

“There is definitely a reluctance among insurers to offer such products because the claim ratios have not been great,” said the head of health business of an insurance firm on the condition of anonymity. “When Corona Kavach was launched last year, infections were at a different scale compared to today. Also, there is no historical data about Covid so the industry did not price the product assuming there will be 300,000-400,000 cases a day. Insurers are making losses on these products.”

While non-Covid claims have remained under check for non-life insurers, Covid-related claims have been increasing at a rapid pace.

As of April 28, 1.1 million Covid health claims worth Rs 15,568 crore had been filed. Of these, 930,729 claims worth Rs 8,918.57 crore have been settled, shows GIC ata.

According to experts, as of March-end this year, several general insurers reported loss ratios above 100 per cent for Covid covers. So, these will inevitably require price revisions.

Given the recent surge in cases, the claim ratio of these policies may continue to develop unfavorably, although the full impact remains to be seen. “Some products have been filed with very low prices as nobody anticipated that Covid would continue for so long. So, some players may have to revise their prices and refile,” said the CEO of a private insurer. 

Bhabatosh Mishra, director of underwriting, products & claims at Max Bupa Health Insurance, said the firm is seeing more demand for comprehensive insurance plans than Corona Kavach.

“During the first wave, many people bought these standard Covid products but failed to renew them as the cases started declining. In the second wave, customers feel since Covid is here to stay and these products have a short tenor, they are more comfortable with comprehensive coverage.”