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Pricing a Covid insurance policy is a big challenge for insurers, say experts
July 22, 2020
Reinsurers’ hesitance to underwrite risk, too, posing a key hurdle Pricing insurance products that cover treatment of Covid-19 is turning out to be a major challenge, especially for private players, given the lack of support by reinsurers, according to experts speaking at the Global Fintech Fest.
“Pricing that kind of a catastrophe... you’re looking at a very big game. And is it really the private insurers’ remit to cover every Indian? We are in the commercial business. We need to be able to price risk, we have shareholders, we also need to just do justice to the policyholders,” said Vibha Padalkar, Managing Director & CEO, HDFC Life.
“Today, there is not a single reinsurer that is willing to underwrite risk for us in terms of corona policy. So, why not ask those reinsurers as well that “guys, why aren’t you in this business?” And a lot of them are global reinsurers. For the high probability of policies, we will be retaining every single rupee of that risk on our balance sheet,” she added.
The session on ‘Insurance: Stepping up to the Covid-19 challenge’ was moderated by Radhika Merwin, Associate Editor, BusinessLine. “Protection against death, disease or disability is a highly underbought segment,” said Yashish Dahiya, Co-Founder & Group CEO, PolicyBazaar. “I think the customer also needs to take responsibility. I believe the customer’s responsibility is buying insurance in time, not after a catastrophe has happened. Specifically, in the Covid situation, we have seen a lot of that,” he said. Dahiya further said that only 45 million customers in the country purchase an insurance policy on their own and the amount is not sufficient for Covid-19 treatment.
Tapping digital space
One way to leverage the “opportunity” posed by the pandemic is to digitise the business and manage expenses accordingly. “It is a bit of a conundrum that you are faced with a lot of headwinds. Here, it is the mother of all unknown. At the same time it is an opportunity. You don’t want to tear down your expenses to such an extent that it starts hurting. You do want to invest in technology because that’s a way of reaching your target customers,” Padalkar said.
According to Dahiya, health insurance has also gone hundred per cent telemedical. In life insurance, that number has jumped from about 30 per cent to about 60 per cent, he said. This huge shift to digital can be further accelerated and better service can be provided to consumers using data, according to Dahiya. Digital platforms account for 50 per cent of term insurance and 25 per cent of fresh business in health insurance, according to the PolicyBazaar CEO.
Insurers likely to witness spike in claims from commercial businesses in FY21
July 17, 2020
Insurance companies are likely to witness a spike in claims from the commercial business this fiscal, primarily from fire and related accidents in plants and stocks in godowns. The increase in claims could be primarily because of the lack of maintenance in factories and plants, which have been shut for a long time due to the lockdown in the wake of the Covid-19 pandemic across the country.
According to industry experts, insurers typically witness a spike in claims from commercial business when there is an economic slowdown. While lack of maintenance could be one of the reasons for the rise in accidents, however, the possibility of a ‘moral hazard’ (where the owner or promoter himself sets the plant or godown on fire to raise claims), cannot be completely ruled out.
“When economy slows down there is a spike in claims. While on one hand the incident could have been caused due to a genuine lack of maintenance or less focus on risk management due to tough economic situation, on the other hand, there is the possibility that there could be certain amount of moral hazard. It is difficult to distinguish the two but we always check,” Sanjay Datta, Chief Underwriting, Claims & Reinsurance, ICICI Lombard General Insurance, told BusinessLine.
Fire accounts for the largest chunk in the commercial business. As on March 2020, the non-life insurance industry witnessed a 35 per cent growth in premium collections from fire at around ₹15,800 crore on the back of a near 25 per cent hike in fire insurance rates mandated by the General Insurance Corporation of India. According to Rajive Kumaraswami, MD and CEO, Magma HDI General Insurance, while the price hike last year was undertaken in certain identified occupancies, the rates are expected to be at least 25 to 30 per cent higher across the segment this year. This would push up premium collections to close to ₹20,000 crore by FY21. While the overall premium collections from fire are likely to be higher mainly because of the price hike, the risk loss will also be “huge”.
As per estimates, India has witnessed close to 35 to 40 instances of industrial mishaps as factories resumed operations after more than a month of nationwide lockdown. A majority of these incidents happened at chemical and textile units and shopping malls, among others. “While the price hike on fire insurance would bring in some benefits, however, based on early trends, there is a feeling that the risk loss is going to be huge. A lot will depend on how well an insurer is able to assess the underlying risk,” said Kumaraswami.
Lack of skilled manpower
Apart from the fact that there is expected to be some ‘deterioration’ due to lack of maintenance at plants due to the lockdown and cash flow issues, the availability of skilled manpower to run and supervise these plants could also pose elevated risks. “There is an absolute shortage of skilled labourers, and that is going to heighten risk and those risks will cause some accidents. Some of the recent mishaps that have happened could well be because there was no adequate availability of skilled labourers and they must have tried to restart the plant without following the standard operating procedure. This is a clear danger,” said P Nandgopal, Founder and Chief Mentor, Insurance Inbox.
Nandgopal also feels there is also a risk of moral hazard. “Having worked in the insurance industry for so many years, I have seen that if people are pushed to the wall they try to take advantage,” he said.
Impact on business
The rise in claims is likely to hit insurance companies hard, particularly at a time like this when the overall growth in business has been slow. As per IRDAI data, the gross direct premium underwritten by general insurance companies up to June 2020 decreased by nearly four per cent to ₹39,330 crore (₹41,072 crore). “Current run rate of business of insurance companies has taken a hit. If your run rate is higher and you are continuously earning money in new business, then your ability to finance your old claims is better, but your run rate has come down and your expenses continue to remain the same, and then suddenly you have the issue of heightened claims then it could pose some problems,” said Nandgopal. Insurance companies have to explore the possibility of digitising their operations, reducing their administrative costs so as to be able to tide over the crisis, he added.
‘Corona Kavach’, ‘Corona Rakshak’ insurance policies on offer from today: Premium, tenure, benefits
July 10, 2020
All general and standalone health insurers will offer standard health policy for coronavirus disease (Covid-19), the Corona Kavach Policy, from Friday.
The Insurance Regulatory Development Authority of India (IRDAI) has made it mandatory for general and health insurers to provide the reimbursement-based standard Covid-19 product and the benefit-based product as optional. Insurance companies will offer ‘Corona Kavach’ and ‘Corona Rakshak’ from Friday. The regulator has said that despite being a coronavirus-specific policy, the standard indemnity-based Covid-19 policy, ‘Corona Kavach’, will cover the cost of treatment of any co-morbid conditions, including pre-existing conditions, along with the treatment for the coronavirus infection or disease. Its tenure will range from 3.5 months to 9.5 months. Under an indemnity plan, a policyholder is reimbursed the hospitalisation expenses actually incurred by the policyholder to the extent of the sum insured.
All life, general and health insurance companies have been encouraged to offer standard benefit-based policy, ‘Corona Rakshak’, which hands out a pre-agreed lump-sum upon diagnosis. IRDAI has said that the premium under both the products shall be the pan-India basis and no geographic location or zone-based pricing will be allowed. The minimum sum insured for the Corona Kavach Policy will be Rs 50,000 and the maximum sum insured would be Rs 5 lakh, according to the IRDAI guidelines. There is also a 5% discount for healthcare workers. However, for Corona Rakshak Policy, the minimum sum insured would be Rs 50,000 and the maximum limit is set at Rs 2.5 lakh.
Corona Kavach policy will be an indemnity-based policy but optional cover shall be made available on a benefit basis. The base cover will offer hospitalisation expenses like room and boarding charges along with PPE kits, gloves, masks and such other similar expenses and even AYUSH treatment. Corona Kavach will also cover home care treatment expenses of up to 14 days, if it involves an active line of treatment and is done on a medical practitioner’s advice, among other conditions. The cost of pulse oximeter, oxygen cylinder and nebulisers will also be covered under this policy.
Corona Rakshak, the single-premium plan, will pay out 100% of the sum insured as lump-sum if the policyholder is hospitalised, at least for 72 hours, after testing positive for Covid-19. The sums insured under the product will range from Rs 50,000 to Rs 2.5 lakh. The policy will cease to exist once the claim is paid out. There is no option to pay premiums in instalments for both these products. Both policies will come with 15 days waiting period, during which no claim will be accepted. Policyholders can avail of the services on a cashless basis, which shall be arranged by the insurer through network providers.
The minimum entry age for both the policies will be 18 years and the maximum 65. Dependent children shall be covered from the age of three months to 25 years. However, only the indemnity policy comes with the family floater option. The policy tenure could be 3.5 months, 6.5 months or 9.5 months, including the waiting period, and health insurance rules such as lifelong renewability, migration, and portability shall not be applicable to these products.
Good News! India is among the cheapest health insurance markets
Mar 14, 2020
With the constantly-increasing prices of healthcare in India, and with the ever-rising instances of lifestyle diseases in the population, health insurance today is a necessity. Health insurance provides people with a much-needed financial backup at times of medical emergencies, but it is an observed fact that till date, medical care in India remains largely as an out-of-pocket expense.
While the costs of healthcare have become prohibitive over the years, the fact remains that healthcare in India is still much more affordable than in a number of developed countries, like the US. This fact has also given impetus to the medical tourism industry in India, making the country quite a hot spot for a number of foreign nationals seeking affordable yet high-quality treatments. Keeping this in mind, one can observe that compared to the numerous benefits being offered by health insurance policies, the premium liable to be paid by the insured is quite affordable and easy on the pocket, especially when compared to other countries.
In India, patients save between 65% and 90% on the cost of healthcare as compared to the US. India is one of the most visited countries for healthcare. This is because of the incredible saving in healthcare costs combined with India’s high-quality service and cutting-edge technology. India also offers a close to zero waiting time for surgeries, which tend to be done right after diagnosis is confirmed. As a patient in India, expect your medical trip to be one of quality healthcare combined with luxury. Fortunately, India is one of the cheapest health insurance markets across the globe offering comprehensive health insurance policies at affordable prices.
The Cost of Health Insurance in Different Countries
Healthcare costs vary based on your age and the state you live in. As you would expect, younger, healthier adults pay the least for healthcare coverage. However, even for younger adults—age 21—the cost of coverage varies great based on geographic location. One of the primary factors in your individual health insurance costs is your location, as prices will vary depending on the state and county where you live. Americans spent $10,000 on average for healthcare in 2016 and this number increased to $19,764 in 2019. The average monthly healthcare premium without subsidies in the USA is – 18 and under: $152, 18-24 years: $177, 25-34 years: $239, 35-44 years: $303 and 45-54 years: $400.
Talking about the price of health insurance in Singapore, on average, people pay around S$1,000 to S$1,500 per annum for a policy that covers medical expenses of up to S$1 million per annum, though some policies offer a discount if you pay the annual fees upfront. The average premium for UK private health insurance is £1,435 per year though the cost of private health care depends on two main factors. First, your personal circumstances, second, the policy options and cover levels that you choose.
Cost of Health Insurance in India
The annual premium of Rs 1-crore health insurance plan in India for a 30-year male living in a metro city costs Rs 9,552 while adding spouse to the plan brings premium to Rs 14,223. For a family where the husband is 34, wife is 33 and a kid is 2-year-old and the family stays in Delhi, the premium would be around Rs 17,312. In the same scenario, if there are two kids one being 3-year-old and the other being 1-year-old, the premium comes around Rs 21,058.
The type of policy to buy should be determined by your family’s needs. The number of family members and their age is crucial to identifying a policy. It is high time to prioritize health care as a fundamental public good and bring it on par with the quality education. Healthcare in India must be made affordable and accessible to all, for the overall development of the country.
Dos and Don’ts for coronavirus
Feb 10, 2020
A lot of people ask me about coronavirus. Since I write about health for The Hindu, they seem to feel that I should know. It’s only fair that I share my knowledge.
First and foremost, I would like to point out that eating Chinese food does not put you at risk. Most of them buy their supplies locally. Some high-end restaurants may be importing from China, so only the rich are in danger. This is not a bad thing.
Regarding things that are strictly forbidden, do not eat bats. This is not an attempt to mock Chinese eating habits. All of us are mystified by what other people eat. There must be people in Norway who find sambar hilarious. Just because the Chinese are fond of consuming a wide variety of innocent woodland creatures, directly from the woods, we should not rush to judge them. Nevertheless, caution is called for.
Many people in India are adventurous when it comes to food items, which is why YouTube is full of videos on how to make paneer chowmein. Now is not the time for such adventures. Paneer chowmein in particular should be avoided at all times, even when there is no fear of contagion. Some people would argue that paneer itself is a contagion, but despite this rising threat, we must not allow ourselves to be distracted.
We should focus on elementary precautions to reduce the risk from coronavirus. For one thing, mummy was right, even though we ignored her when she said so. We need to wash our hands regularly, especially before cooking or eating. We need to follow what is known as coughing etiquette, which means, do not cough on other people, even if you don’t like them.
Sneezing etiquette is also extremely important. As a young boy in the UK, I was thoroughly schooled in the use of handkerchiefs, but I was misled. Do not ever sneeze into a handkerchief. It makes no sense to carefully preserve germs and carry them around in your pocket or handbag. The British can’t help it. After spending years with them in India, we know that they tend to grab and keep whatever they can lay their hands on, including bodily fluids. The rest of us should eschew this practice.
Instead, use a tissue, and carefully dispose of it afterwards. Then you should wash your hands, or use a hand sanitiser. You could also wear a mask, which has the additional benefit of making you harder to identify, but only if you’re coughing and sneezing, or live in Delhi. When you remove it at the end of the day, hold it by the strings and don’t touch the icky bits. Remember to wash your hands. Try to avoid crowded places, which gives you a good excuse for missing parties you don’t want to go to. If you are in a crowded place, and someone is coughing, quietly shuffle away until there’s a gap of at least three feet between you. Do it slowly in order to avoid being obvious.
We all hope that the outbreak ends soon, both in China and the rest of the world. But if you follow these simple precautions, you should be a safer, cleaner person.
Shovon Chowdhury’s most recent novel, Murder With Bengali Characteristics, contains some jokes about Chinese eating habits which the author now regrets.
Source: The Hindu
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