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In general, the Indian insurance sector is well equipped for key loss incidents, including pandemics; However, the financial implications will take time to figure out and will be explicit to the insurer. Insurers are acting in response to the expanding COVID-19 outbreak on numerous fronts, including as claims payers, property owners and investment executives. Each has its own discreet front, not only for the insurance industry, but also for the global economy and the general public.
What could have been an astonishing year for the Indian insurance sector in terms of premium growth is abruptly facing a state where matching last year’s figure looks like a daunting challenge. The most recent three months of financial years have conventionally been the months that observed peak collections for the industry.
Now, given the lockdown in earnest the last week of April, the premium collections are starting to suffer considerably. The blow is huge because most cities are now on lockdown. Due to flight cancellations, clients do not purchase travel insurance. Buying new policies where insurers need to perform medical tests is time consuming and has delays. There is no further issuance of new policies for NRIs or those with current travel history. So overall, the insurance segment has been affected in many directions.
Insurance Premiums Versus Death Claim Challenge
In addition to the loss of premiums from new business, the insurance industry is challenged by higher death claims. Although the government has proceeded positively and opted for a full 21-day lockdown even before the death toll hit double digits. However, given the first signs of community spread that become apparent and the size of the country, nothing can be taken for granted. Insurance agencies believe that it would be too soon at this stage to comment on the exponential increase in death claims in life insurance. If India can efficiently manage the spread, there could subsequently be less of an impact on life insurance claims. Speaking of life insurance policies, several organizations will persist in honoring the claims of current policies in reverse; the price of future policies will see an increase in rates and the number of policies that offer comprehensive coverage may see a drop,
The IRDA clarification
Corona is facing the biggest challenge the Indian insurance sector has seen so far. The infection is pan-Indian in scope and there is a very real risk of its exponential spread. Treatment of COVID-19 may require prolonged hospitalization that could be expensive. Many people have some form of health coverage, whether it is a personal health coverage company. However, as this virus is new, there is a lot of uncertainty as to whether corona cases would be covered by the health policies offered or not. To address policyholder concerns and clarify coronavirus coverage, insurance regulator IRDA issued instructions to insurance companies on March 4. The IRDA law establishes: that if hospitalization is covered, insurance companies must ensure that cases related to COVID 19 are dealt with quickly.
the road ahead
Although insurance companies are listed as exempt services under the lockdown with common movement restrictions, there is hardly any prospect of new business. Insurance players with a robust digital infrastructure should fare better than others if there is a spike in COVID-19 cases (as seen in China and Italy). One of the main challenges for insurers could be to leverage substitute work arrangements for their employees and sales force so that they are more flexible and able to deal with increased claims and faster response times.