Amid Covid scare, life insurers go slow on renewing group-term plans

The worsening Covid-19 scenario in the country, with infections as well as deaths rising at an alarming rate, and the adverse claims experience of life insurers have made them apprehensive of renewing group-term policies of some corporate entities, citing low premiums, among other things.
 
Group-term policies offer life insurance cover to a group of people under a single policy. A group insurance policy is not restricted to merely employer-employee groups but is also extended to others such as customers of banks, NGOs, professional groups, non-banking financial institutions, and microfinance institutions.
 
On social media platforms such as Twitter, people were seen complaining about the fact that many private insurance companies are not renewing group-term plans as they do not want to underwrite such risks during the pandemic. Recently, the chief executive officer (CEO) of a media company shared a post saying a few private life insurers such as TATA AIA Life Insurance, Aegon Life Insurance and Max Life Insurance refused to renew their group-term life plans.

 

“Customers are finding it difficult to get renewals done smoothly. Group term life rates have gone up in many cases significantly and some insurers may be trimming down their portfolio,” said Sanjay Kedia, country head and CEO, Marsh India.
 
“Overall reinsurers have become more diligent while evaluating the risk and potential exposures as they want to avoid volatility in their portfolio. Smaller groups, therefore, are facing more challenges. But we are not seeing a trend where coverage isn’t offered. There are options available but at a higher premium rate than earlier times because of accentuated risk.”
 
An industry source said while top private players are not denying group-term policies to any customer but for such policies, they are currently quoting rates based on the characteristics and the experience of the group concerned.

 
Business Standard reached out to a host of private insurers to get their views on why life insurance companies are denying renewal of group-term policies.
 
Aalok Bhan, director and chief marketing officer, Max Life, said, “Group-term insurance remains an important business category for Max Life Insurance. However, as with all life insurance businesses, the Covid pandemic poses a significant risk to the performance of the group-term business. Hence, there is a need for carefully underwriting of any business during these times. Max Life currently remains open to writing group-term business and is continuing to offer coverage renewal to its existing corporate group customers.”

 
Life insurers, 24 in total, have spent crores on Covid death claims, which are over and above the normal death claims they receive every year. So, claims and mortality experiences for them have become adverse during the pandemic.
 
As of March 25, life insurers have paid Rs 1,986 crore towards 25,500 Covid death claims, according to data compiled by the Life Insurance Council. In the past few weeks, the second wave of Covid has wreaked havoc in the country, resulting in infections and deaths due to it rising at a very alarming rate. Given this situation, the claims experience for life insurers is expected to get much worse.

 
Experts said the adverse claims experience for life insurers will not immediately impact their solvency ratios but will surely impact their profitability. It will also impact mortality assumptions in new product development, they said.
 
According to experts, the impact will be felt more directly on group-term policies that are annually renewable. In long-term savings products, companies have higher risk tolerance ability and a longer duration to absorb volatility.
 
Kayzad Hiramanek, chief – operations and customer experience, Bajaj Allianz Life, said, “Life insurance is sold to individuals and corporate entities based on underwriting guidelines designed keeping the interest of the insured pool in mind. We continue to offer our customers value-packed life insurance products, and these are issued when they meet these guidelines, irrespective of whether they are individuals or corporate entities.”