Impact of COVID-19 on Health and Motor insurance

Impact of COVID-19 Lockdown on Health and Motor Insurance Sectors in India

COVID-19 cases in India have now crossed 50,000 as the country extends its lockdown for two more weeks starting 4th May. The Coronavirus outbreak is leading to considerable economic hardship for all businesses, communities and consumers. The insurance industry has been struck too.

The General insurance or non-life insurance sector till February 2020 maintained FYTD growth of 13.92%. Even in a worst-case scenario, it could close the year with some growth to show. That being said, the bigger picture for the insurance sector does not look promising.

Continuity of business issues, constant fixed costs, reduction in premium (renewal and new), increase in claims outgo, sustaining the financial outlook of the company and the economic slowdown are some of the many challenges it faces.

“The Covid-19 will surely have its negative impact on the Indian non-life insurance industry as the lockdown is expected to continue in one way or other. There will be a drop in the business for the first quarter while improvement is expected in the second quarter of FY 21.” G. Srinivasan, Director, National Insurance Academy.

Let’s find out how the insurance industry is dealing with coronavirus and what impact does a COVID-19 lockdown has on the retail business that primarily comprises of Health and Motor insurance.

Health Insurance

  • The number of queries for COVID-19 insurance policies has sharply risen, as much as 10,000/day for certain established companies.
  • Several insurers have launched coronavirus-specific need-based health policies.
  • Multiple insurance providers have started offering health insurance without medical checkups with the help of tele-underwriting.
  • The demands for healthcare insurance, standalone COVID-19 policies and retail/comprehensive covers have gone up.
  • Comprehensive policies, especially the ones covering pandemics such as COVID-19, are the most sought-after.
  • Online health insurance sales have increased by approximately 30%, and offline sales have slowed down.
  • The Insurance Regulatory and Development Authority of India (IRDAI) has ensured the following medical conditions are no longer excluded from the healthcare insurance: Mental health procedures/illnesses, Artificial life maintenance, Internal congenital diseases, Puberty, Menopause-related disorders, Age-related muscular degeneration and Genetic disorders.
  • 2-weeks long hospitalisations are more common than before, and they are resulting in higher claim costs.
  • Guidelines have been issued for general and health insurers to ensure quick claim settlements for coronavirus disease/infection.
  • Customers could be allowed to pay the health insurance premium in instalments.
  • It has been made mandatory for all employers resuming functioning after the lockdown to provide medical insurance to their employees.
  • Renewal dates for health insurance policies have been extended to 15th May (for dates falling between 25th March and 3rd May2020).

The Consequences

  • Sufficient time will be saved as your requests for cashless treatment, and final discharge from hospitals will be managed within two hours. At this stage, there is no final word on the 2-hour clause and if at all it will be applied later.
  • Insurance products will become less complicated and more attractive to customers. The health insurance coverage in the future could expand, and more diseases will be addressed.
  • Policies may become costlier; premiums could go up by 5-10%, vary across companies and insurance products.
  • Healthcare covers will be issued with revised rates, but the insurers may not increase premiums soon.
  • Insurance providers may or may not increase premiums for existing policyholders, and you should check all the terms and conditions at the time of renewal.
  • Policyholders whose renewal premium is due from now till 31st March 2021, can pay it in monthly, quarterly or half-yearly instalments as well as annually.
  • Mandatory health insurance provided by employers can be typically taken for at least one year and extended beyond lockdown. The insurers can tailor policies to suit the budgets of small enterprises.
  • Renewal dates have been extended. It should be noted that the insurer may not consider any claim filed during the grace period for the settlement. On humanitarian grounds, insurers may allow the insured individual to pay the due premium at the time of hospitalisation (during the grace period) for the claim; however, it would entirely depend on the insurer’s discretion. It is advisable to renew your policy before the renewal date is missed.

Motor Insurance

  • There is a dip in motor insurance sales as new automobiles are not being sold because of the pandemic. There is a dip in motor insurance sales as new automobiles are not being sold because of the pandemic.
  • Few or no motor vehicles on the road due to complete or partial lockdown.
  • Renewal dates for motor insurance policies have been extended to 15th May (for dates falling between 25th March and 3rd May2020).

The Consequences

  • Motor insurance claims could drastically come down.
  • Relief for policyholders who could not make payments amid the nationwide lockdown.
  • Customers can still voluntarily visit the insurance company’s website and pay the premium through online mode.

Relaxation for Insurance Companies

The IRDA has relaxed the conditions for board meetings of insurers. The meetings due till 30th June can be held through video-conferencing or other audio-visual means per Rule 3 of the Companies (Meetings of Boards and its Powers) Rules, 2014, as amended on 19th March 2020.

Insurance offices are a part of exempted services under the lockdown, yet, with restrictions on movement, there is less likelihood of any new business.

Consumer sentiments are also playing a vital role. As one senior insurance executive described –“People have ‘bunkered down’ and are conserving cash.”

The insurance providers with robust digital infrastructure should perform better than others, withstanding the operational challenges in selling and servicing products digitally.

When the dust settles, the unpleasant economic realities, the threat of pay cuts and job losses will persist. Undoubtedly, it will be a tough ask to recover and register growth in the new financial year. A lot will rely on how India tackles the COVID-19 complexities in the coming months.

All said and done; the crisis could turn out to be an inflexion point and bring a paradigm shift in how our population views insurance, not as a luxury, but as a necessity.

At Quickinsure, compare Health Insurance and Motor Insurance by going through quotes from various established insurance providers.

Sources: IRDAI, Business Today, The Economic Times-Wealth, CNBC TV 18, Money Control, Bloomberg Quint, Outlook, Livemint, The Pioneer, India Times, Wikipedia and other information channels.

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