With a steep rise in covid-19-related claims, health insurers could increase annual premiums by as much as 20% if the rise in the number of infections isn’t arrested, three industry executives said.
“According to our estimates, there will be at least a 20% impact on the net earnings of health insurers due to covid-19 claims, forcing some insurers to contemplate a rise in premiums for new policies,” a senior insurance company executive said, requesting anonymity.
The revenue of health insurers for fiscal 2020 was around ₹40,000 crore, which was led by higher sales of covid-linked products and other comprehensive health cover policies.
As a result, the combined gross premium earned was 15-20% higher in FY21, while the total claims from covid policies in terms of value was around 30% of the total health premium collected by the industry, according to three persons, including two health insurance industry officials.
“Even if we add a 10% incremental impact on this ratio (as a percentage of premium collected), the amount of claims would not be less than ₹25,000 crore, considering a 20% growth in health insurance premium collected during fiscal 2021,” said a second person, also a senior health insurance industry executive. But claims from other health treatments have come down for the industry since many customers have postponed their scheduled surgeries due to covid-19. To some extent, this will mitigate the impact of claims made under covid-19 policies. So, on a net basis, the impact on the net earnings could be around ₹15,000 crore, which is huge,” said the second person cited above.
“If the number of cases and claims go up in this manner, there is a fair chance that insurers will rethink on pricing, approach the Irdai (Insurance Regulatory and Development Authority of India), refile their products and increase the cost or premium of covid-19 health policies,” said the first person. “The rate of claims has been increasing post-March. The rate of claims is in direct proportion to the increase in the number of covid-19 cases in India. The claim numbers were the highest in September last year, and we thought that was the peak. But now the claim numbers are more than double that of even the September numbers because covid-19 cases have more than doubled,” said the second person.
Last fiscal, industry data showed around ₹17,000 crore worth of claims were made against covid-19 treatments while the number of covid-19 claims as a percentage of positive covid-19 cases in India hovered around 7%.
“But this has increased now because the fear of covid-19 pushed many more people to buy covid-19 insurance policies and, hence, the claims, too, are going up significantly. There will be a massive impact on the industry like any other catastrophe,” said a third person, a senior industry professional.
According to industry data, covid-19 policy claims constitute about one-fifth of overall claims in the health insurance industry claims in terms of value.
Experts say the overall hit on insurers will finally depend on how quickly the pandemic is brought under control.
“If the measures being taken by the government fail to arrest the rise in covid-19 cases, the claim figures will shoot up beyond expectation, and that may lead to a 15-20% rise in premium cost for buying health insurance policies that cover covid-19,” said a fourth industry executive, who works with a large consultancy firm.
There are 32 general insurers in the country who sell covid-19 health cover policies.
According to Irdai, during fiscal 2021, general insurers underwrote a total gross premium of ₹1.98 trillion. For fiscal year 2021, up to the month of February, health insurer collected a total premium of ₹52,886.54 crore.