‘Corona Kavach and Rakshak policies loss-making products’

MOST OF THE INSURERS AND REINSURERS HAVE ASKED THE IRDAI FOR RE-PRICING OF THESE POLICIES

NEW DELHI: Insurance policies Corona Kavach and Corona Rakshak have turned out to be loss-making products for most insurers, prompting them to seek for a re-pricing from the regulator as the high claims payouts are eating into their profits.

“It has turned out that Corona Kavach and Corona Rakshak have been making losses for most of the insurers. All of us launched these products in July (last year). We are severely under-priced on Corona Raksha and Corona Kavach policies,” a top executive from a general insurance company told PTI on the condition of anonymity.

Based on data available till June this year, the official said comparing the peak of the pandemic of other countries and of India, the country’s peak was higher than the other countries.

“Our second peak has been double of our own peak and higher than any other country in the world. And, I would be surprised if this product is making money for any of the insurers,” said the official.

The official said most of the insurers and reinsurers have asked the Insurance Regulatory and Development Authority of India (Irdai), for re-pricing of these two policies.

However, the official said it would be difficult to suggest what kind of price revision they are seeking as it differs from company to company.

Another official from the industry said, “As per my understanding, Corona Rakshak and Corona Kavach are lossmaking policies for the insurers.

“Given that there are such huge underwriting losses, companies have been speaking to the regulator that an increase in the premium will help (them). In life, we have already seen an increase in premiums,” said the person cited above.

According to an ICRA report in June this year, based on analysis of the performance of 17 general insurance companies representing 90% of the industry-wide gross direct premium written, the industry’s underwriting losses are set to rise this fiscal due to higher claims.

Of these, the governmentowned insurers are expected to report high underwriting losses of ₹12,400 crore to ₹13,500 crore in the current financial year mainly on account of likely high claims ratio on health and motor portfolio.

“Non-life insurers have settled mediclaims worth ₹24,000 crore till date since the onset of the pandemic,” Ankit Agrawal, founder and chief executive of InsuranceDekho, said.

To address the financial protection needs related to the costs of Covid-19 treatment, Irdai had designed these two Covid-19-specific products after the spread of the pandemic last year.

Corona Kavach is an indemnity-based standard health policy and Corona Rakshak is a standard benefit-based health insurance policy.

All general and health insurers were mandated to offer Corona Kavach on or before July 10, 2020. While all the insurers (general, health and life) were asked to launch Corona Rakshak policy by the same date.

Corona Kavach has sum insured options ranging from ₹50,000 to ₹5 lakh (in the multiples of ₹50,000). Corona Rakshak has sum insured in the range from ₹50,000 to ₹2.5 lakh (multiples of ₹50,000).

Both the policies come with options of three policy durations—three-and-a-half months; six-and-a-half months; and nine-and-a-half months.