Insurers face double whammy from Covid, non-covid claims

General insurers and standalone health insurers are facing a double whammy. With exponential rise in coronavirus-positive cases, reported Covid claims have topped 200,000, worth over ~3,000 crore, and are set to rise further as cases explode. Furthermore, non-covid claims, which were muted in the initial months of the pandemic, have also picked up pace and are more or less at pre-covid levels.

Although insurers feel loss ratios in the health segment may get hit, and profitability will take a hit, capital erosion will not take place. “Non- Covid claims are more or less reaching precovid levels. The Covid-19 claims were expected. We have to see how the entire year plays out. There was some benefit of discretionary claims not taking place in the first three-four months of the pandemic,” said a chief executive of a private insurer.

“At least for general insurers, capital will not be too much of an issue because the proportion of health is 15-20 per cent and retail health constitutes an even smaller proportion. But there will be dent in profitability in the second half of the year,” he said. “The loss ratio is expected to be higher by 8-10 percentage points for the full year if Covid-19 claims keep multiplying at the current pace,” said Bhaskar Nerurkar, head-health claims, Bajaj Allianz General Insurance.

The fear of contracting the virus had resulted in people deferring their planned surgeries and hospital visits, resulting in general and health insurers receiving far lower claims. But that trend has reversed. And, so has the trend for Covid-related claims. At the end of July 31, insurers had received 81,000 claims. But as of September 8, the claims reached 193,000, indicating doubling of claims in just a month’s time.

“The absolute numbers look scary as far as claims from Covid and non- Covid ailments are concerned. But insurers are also selling more health insurance policies now,” said Amit Chhabra, business head-health, Policybazaar.

The share of health insurance business in the Indian market has grown from 27 per cent to 30 per cent in a very short period (between March and July). And, public awareness on the need for health insurance has grown exponentially in the past few months. This has resulted in the health insurance segment becoming the leading business segment for non-life insurance firms.