Impact of COVID-19 on the Indian Insurance Sector
The Indian insurance sector is in general well equipped for key loss incidents, including pandemics; however, the financial implications will take time to take part in and will be insurer explicit. Insurers are acting in response to the expanding COVID-19 outbreak on numerous fronts-as claims payers, owners, and investment executives. Each has it’s own discrete confront, not just for the insurance industry, nevertheless for the global economy and the public at large.
A year which could have been an astounding year for the Indian insurance sector in terms of premium growth is abruptly staring at a state where harmonizing the last year’s figure seems an intimidating challenge. The most recent three months of financial years have conventionally been the months that observed peak collection for the industry.
Now given the lockdown in serious last week of April, premium collections are beginning to suffer considerably. The blow is enormous for the reason that most cities are now under lockdown. Owing to flight annulments, travel insurance is not being bought by customers. Purchasing new policies where insurers need to take up medical tests are consuming time and has a delay. There is no more new policy issuance for NRIs or those with current travel history. So, in general, the insurance segment has been hit in many directions.
Insurance Premiums Vs Death Claim challenge
In addition to the loss of new business premiums, the insurance sector is looking at a challenge of enhanced death claims. Though the government has proceeded positively and gone for a total lockdown of 21 days even prior to the number of death toll ascent to double digits. Nevertheless, given the early signs of community spread becoming obvious and the size of the country, nothing can be taken for granted. Insurance agencies feel it would be too early at this stage to remark on exponential augmentation in death claims in life insurance. If India can efficiently manage the spread, subsequently, there could be a slighter impact on life insurance claims. Talking about life insurance policies, a number of organizations will persist to honor the claims on current policies conversely; the price of future policies will see an increase in the rates and the number of policies that offer comprehensive coverage may witness a fall,
The IRDA Clarification
Corona is going to the major challenge the Indian insurance sector has seen so far. The infection has a pan-India reach and there is a very genuine risk of its distribution exponentially. Treatment of COVID-19 may require extended hospitalization which could be expensive. Many individuals have some type of health coverage, be it a company of personal health cover. Though, as this virus is new, there is a lot of uncertainty if corona cases would be covered under offered health policies or not. To deal with the concerns of the policyholders and to bring clearness on the coverage of coronavirus, insurance regulator IRDA came up with instructions for the insurance companies on March 4. The IRDA law stated: that if the hospitalization is covered then the insurance firms shall ensure that the cases related to COVID 19 shall be rapidly handled.
The Road Ahead
Though insurance firms are listed under the register of exempted services under the lockdown with common restrictions on movement there is barely any chance of new business. Insurance players with robust digital infrastructure ought to fare superior to others if there is a spiky rise in COVID-19 cases (as observed in China and Italy). One of the main challenges for insurers could be empowering substitute work arrangements for their employees and sales force such that they are more flexible and able to deal with rising claims and quicker response times.