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India:Motor insurance sector faces decline
Aug 14, 2020
The motor insurance business in India is projected to contract by 27.2% in 2020 which would be a sharp decline from the 10.1% growth witnessed in 2019 according to data and analytics firm GlobalData. The firm has revised India's motor insurance forecast in the aftermath of the COVID-19 outbreak.
As per the latest data, the motor insurance business is expected to register a compound annual growth rate of 1.1% over 2019-2023 in comparison to the earlier forecast of 11.3%. The lower growth is primarily attributed to the current economic uncertainty and lockdown restrictions imposed in India to control COVID-19 pandemic.
“The recent lockdown restrictions resulted in the decline of consumer spending and impacted the new vehicle sales. In June 2020, the passenger vehicles and two-wheelers sales declined by 50% and 40%, respectively, compared to June 2019. This has impacted motor insurance premium collections,” said GlobalData insurance analyst Pratyusha Mekala.
According to the Insurance Regulatory and Development Authority of India (IRDAI), overall motor insurance premiums registered growth of 1% in June 2020 compared to the previous year. This growth could be due to the higher share of renewal premiums.
While the motor own-damage sub-segment declined by 2.7% due to the fall in vehicle sales, the mandatory third-party liability segment reported 3.2% growth during the same period and supported the overall insurance growth in June 2020.
The recent regulatory changes following the pandemic are also said to have impacted motor insurance premium growth.
In March 2020, the IRDAI put on hold the proposed hike ranging between 2-10% on third-party liability insurance premium. Additionally, the move to discontinue long-term own-damage motor policies, effective 1 August, will also result in lower spending on motor insurance this year.
Therefore, Ms Mekala noted that motor insurance business recovery in India is expected to be stretched despite the gradual revival of the economy. “The pressure on new vehicle sales is likely to continue until 2021, resulting in sluggish growth in motor insurance premium,” she said.
India:Schools provide health insurance cover to all staff
Aug 13, 2020
Two schools in the western Indian state of Gujarat have provided health insurance cover to all their teaching and non-teaching staff which also covers COVID-19. The COVID-19 pandemic has brought about huge challenges to schools across the country as most institutions remain closed and most adopting the online schooling system.
The Ahmedabad-based Udgam school and Zebar school have provided this health insurance cover for INR300,000 ($4,010) and a life cover of INR1m that also includes COVID-19 treatment for all its teaching and non-teaching staff.
Reinsurance firms reluctant to cover covid-only plans
July 24, 2020
The absence of the reinsurance option for covid 19 policies has been a challenge for the insurance industry, said representatives of both life and health insurers during the Pivot or Perish online insurance meet organized by Mint on Thursday. Prasun Sikdar, managing director and chief executive officer, Manipal Cigna Health Insurance Co. Ltd, said indemnity covers do not present a huge reinsurance need since most corona patients are asymptomatic or have mild symptoms. But a benefit-based corona policy will need reinsurance due to the uncertainty about the diagnosis rate.
Bhargav Dasgupta, managing director and chief executive officer, ICICI Lombard General Insurance, also emphasized on the need for reinsurance in benefit-based policies, such as Corona Rakshak, due to the higher possibility of fraud. The Insurance Regulatory and Development Authority has allowed two covid-19 policies—Corona Kavach and Corona Rakshak. Corona Kavach is an indemnity product, wherein a patient is reimbursed the actual cost of treatment, and non-life firms are mandated to offer the product.
Corona Rakshak, however, is a benefit-based policy wherein the patient is offered a fixed amount on being hospitalized for 72 hours for covid-19. For such policies, the full amount has to be paid if the beneficiary is diagnosed with covid-19. “If your frequency assumption on the number of people who fall sick goes wrong, you could end up losing a lot of money and for that you need reinsurance," said Dasgupta, adding that while insurers were mandated to launch the corona policies, there has been no compulsion on reinsurers to provide cover. This has led to a wide variance in premiums as companies are modelling the risks differently, and smaller insurers are being compelled to quote higher premiums as the risks are higher, Dasgupta added.
Go for Corona Rakshak if you already have health insurance
July 23, 2020
Most insurance companies have started offering the regulator-mandated standard indemnity health policy, Corona Kavach, for covid-19, but only a few have launched the standard benefit-based policy, Corona Rakshak. Though both these products target claims for covid-19, it’s not mandatory for insurers to offer Rakshak. Since the Insurance Regulatory and Development Authority of India (Irdai) has not mandated it, but only Kavach, should you buy Rakshak?
What does it offer?
Like Corona Kavach, Corona Rakshak too offers three policy tenures—105, 195 and 285 days or 3.5, 6.5 and 9.5 months, respectively. The minimum entry age is 18 and the upper age limit, according to Irdai, shall not be less than 65, and there’s a 15-day waiting period. You can opt for a sum insured between ₹50,000 and ₹2.5 lakh in multiples of ₹50,000.
The policy will pay 100% of the sum insured if the policyholder is hospitalized for 72 hours on positive diagnosis for covid-19 from a government-authorized diagnostic centre. Once the sum insured is paid, the policy will terminate and there is no renewal option. You also don’t have the option to migrate or port the policy from one insurer to another. The policy is available on an individual basis only and does not have the floater option.
How much does it cost?
Only a few insurers are offering Corona Rakshak. Among insurers who shared their rates with Mint, premiums for Future Generali India Insurance Co. Ltd’s Rakshak policy are on the lower end of the spectrum compared to those for Star Health and Allied Insurance Co. Ltd (see graph). “The rate of infection is only increasing and on testing positive, we’ll have to pay the full sum insured. One can get hospitalized even for mild symptoms and once that happens we’ll have to settle the claim. The fact that we are a stand-alone health insurer means that we’ll have more claims coming our way. We’ve priced the product considering all these aspects," said S. Prakash, managing director, Star Health and Allied Insurance. Note that depending on the pre-existing diseases and co-morbidities, the insurer may choose to increase the premium or choose to not sell the policy to you.
Should you buy?
Understand that it may not be right to compare the Corona Kavach with Corona Rakshak because both the products have different purposes. While the Kavach policy (indemnity) will pay for your hospitalization expenses, Rakshak (defined benefit) is meant for income replacement. Mahavir Chopra, founder, Beshak.org, an independent research platform for insurance buyers, said people who have a policy with a lower sum insured or with any room rent limits could consider the Corona Kavach policy. Sub-limits could result in proportionate deductions and Kavach does not have any sub-limits. “If you have pre-existing diseases and are lucky to get a policy, it could work in your favour as you will be covered after a 15-day waiting period," he said. Corona Rakshak could suit you if you already have a health insurance policy but feel that a positive diagnosis for covid-19 could result in loss of income. “It works for people looking at income replacement due to hospitalization. Also, any deduction that happens on the health insurance claim can be supplemented with this benefit-based policy. In regular health policies, sometimes PPEs (personal protection equipment) and other consumables may not be covered. This is where Rakshak could help," added Mahavir. The premiums of Rakshak are only around 1-2% of the sum insured in the case of most insurers. But it’s important to note that one must get hospitalized for 72 hours to be eligible for a claim.
Naval Goel, CEO and founder, PolicyX, an online insurance aggregator, said if you have a regular indemnity-based policy, you should buy Corona Rakshak to avail benefits of fixed cost or if you’re the sole breadwinner in the household. “Don’t forget that most indemnity-based policies cover coronavirus. If you do not have any health insurance coverage, then you should look at buying the Corona Kavach policy. Corona Rakshak is ideal if your hospitalization may impact the household’s financial situation." Chopra said from a policyholder standpoint, a 72 hours hospitalization period is reasonable. The only thing that one must compare is the premiums because the product is standard across insurers but the cost could vary largely. Also, keep in mind that in case of individuals with underlying conditions, buying these policies may not be easy but if you’re already covered under a health insurance plan, there isn’t too much to worry about because all regular health insurance plans cover covid-19.
Amazon now sells Auto Insurance in India
July 23, 2020
Amazon’s India business said on Thursday it has begun offering auto insurance to cover two and four-wheelers in the country, marking the American giant’s first foray into this financial services category globally. The e-commerce giant said it had inked a deal with Mumbai-headquartered Acko General Insurance to offer customers car and motor-bike insurance. Amazon is also an investor in Acko.
Mahendra Nerurkar, chief executive and director of Amazon Pay in India, said on Wednesday evening at a fintech conference that the company was planning to expand its insurance service to offer coverage on health, flight and cabs. The auto insurance is available to customers through Amazon Pay on the e-commerce giant’s website and app. The company said buying insurance will take less than two minutes and requires no paperwork.
“This coupled with services like hassle-free claims with zero paperwork, one-hour pick-up, 3-day assured claim servicing and 1 year repair warranty – in select cities, as well as an option for instant cash settlements for low value claims, making it beneficial for customers,” it added. Customers who have subscribed to Amazon Prime, the company’s loyalty program that costs about $13 a year in India, will be able to access additional benefits and discounts, Amazon said without identifying those benefits.
India’s insurance market is the latest financial services sector that has attracted the attention of local and international tech giants. Paytm, India’s most valued startup, and its chief executive Vijay Shekhar Sharma, acquired insurance firm Raheja QBE for a sum of $76 million earlier this month. In India, only a fraction of the nation’s 1.3 billion people currently have access to insurance, and some analysts say that digital firms could prove crucial in bringing these services to the masses.
According to rating agency ICRA, insurance products had reached less than 3% of the population as of 2017. An average Indian makes about $2,100 a year, according to the World Bank. Of those Indians who had purchased an insurance product, they were spending less than $50 on it in 2017, ICRA estimated. “Our vision is to make Amazon Pay the most trusted, convenient and rewarding way to pay for our customers. Delighted by this experience, there has been a growing demand for more services. In line with this need, we are excited to launch an auto insurance product that is affordable, convenient, and provides a seamless claims experience,” said Vikas Bansal, director and head of financial services at Amazon Pay in India, in a statement.
Though Amazon Pay is available in several markets, the payments service’s offering in India remains unmatched. The company has used the world’s second largest internet market, where it has invested more than $6.5 billion to date, as a testbed to explore various unique opportunities. The Amazon Pay app in India, for instance, also sells movie and flight tickets.
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