Rising Covid, non-Covid claims a double whammy for general, health insurers

Insurers said while the situation had been manageable so far, going ahead, it would be a cause for concern

General insurers and standalone health insurers are facing a double whammy. With exponential rise in coronavirus-positive cases, reported Covid claims have topped 200,000, worth over Rs 3,000 crore, and are set to rise further as cases explode. Furthermore, non-Covid claims, which were muted in the initial months of the pandemic, have also picked up pace and are more or less at pre-Covid levels.

Although insurers feel loss ratios in the health segment may get impacted, and profitability will take a hit, capital erosion will not take place, at least for the large entities.

“Non-Covid health claims are more or less reaching pre-Covid levels. The Covid-19 claims were unanticipated. We have to see how the entire year plays out. There was some benefit of discretionary claims not taking place in the first three-four months of the pandemic,” said a chief executive officer of private sector general insurance company.

“At least for general insurers, capital will not be too much of an issue because the proportion of health is 15-20 per cent and retail health constitutes an even smaller proportion. But there will be dent in profitability in the second half of the year,” he added.

“The loss ratio is expected to be higher by 8-10 percentage points for the full year if Covid-19 claims keep multiplying at the current pace,” said Bhaskar Nerurkar, head-health claims, Bajaj Allianz General Insurance.

Digestive system-related ailments constitute 15 per cent of health claims, infections make up for 13 per cent, potential health hazards are another 13 per cent, and then there are other injuries and surgeries. In the initial months of the pandemic, the fear of contracting the virus had resulted in people deferring their planned surgeries and hospital visits, resulting in general and health insurers receiving far lower claims. But that trend has reversed. And, so has the trend for Covid-related claims. At the end of July 31, insurers had received only 81,000 claims. But as of September 8, the reported claims reached 193,000, indicating doubling of claims in just a month’s time.

“The absolute numbers look scary as far as claims from Covid and non-Covid ailments are concerned. But insurers are also selling more health insurance policies now. So, business, too, has increased. And Covid claims constitute only 10 per cent of total claims for insurers,” said Amit Chhabra, business head-health, PolicyBazaar.

Due to the pandemic, the share of health insurance business in the Indian market has grown from 27 per cent to 30 per cent in a very short period (between March and July). And, public awareness on the need for health insurance has grown exponentially in the past few months. This has resulted in the health insurance segment becoming the leading business segment for non-life insurance companies. One testimony to this is the Corona Kavach policy, which was launched on July 10 and saw a huge initial demand. Even now, week-on-week, there is 15 per cent growth in the policy. The increase in business will somewhat offset the alarming claim numbers as of now, experts believe. But going forward, it will pose challenges to insurers.  

“While there is demand for health insurance policies, it is more so in Covid-19-specific policies, which have a small ticket size, approximately 15 per cent of our normal ticket size,” added Nerurkar.

“The stronger insurers will be able to mitigate the impact of this event, but the ones who have capital issues may encounter problems. Loss ratios in the segment will get impacted, but insurers with good capital position will be able to sail through,” said a senior insurance executive.