Insurers see adverse impact of Covid-19 claims on their loss ratio

A year has passed since the Covid pandemic hit India. Since then, Indian insurers, especially the non-life ones, have seen an unprecedented amount of Covid claims being reported to them.
 
Indian insurers had not factored in the impact of Covid claims while underwriting their products. Therefore, these claims have mostly not been anticipated. Despite that, insurers remain unsure of the impact of such claims on their loss ratios as well as on the pricing of their products.
 
While many say the loss ratio of their health portfolio has taken a hit because of the unanticipated Covid claims, it is yet to impact their solvency in any meaningful way.
 
Also, most insurers are of the opinion that price revision of their product offerings will depend on the claims experience of the entire year, and it is too early to take a call on that. However, in the case of Covid-specific products, where the claims experience has been particularly bad, there may be some price revision in the offing.
 

Experts said many companies have a loss ratio, which is a little adverse than they had anticipated.
 
And, the second wave of Covid is much bigger and stronger than the first wave. So, it is natural that Covid-related claims will have an impact on companies, they felt. If the eventual impact of Covid claims is sustainable, then premiums would not be revised. If it is unsustainable, premiums will be revised.
 
Bhabatosh Mishra, director of underwriting, products & claims, Max Bupa Health Insurance, said, “As a company, we decided not to go for a revision in premium last year to offer some relief to our customers as Covid had impacted most economically. We are closely monitoring the situation, as far as this second wave is concerned, and have adopted a 'wait and watch’ approach in terms of impact on premiums”.
 
“As far as Max Bupa is concerned, we have a very strong solvency position. We are well capitalised and there is no constraint on us with regard to capital,” he added.
 
According to AM Best, a US-based credit rating agency that focuses on the insurance industry, over the first few months of the lockdown, health insurance claims declined substantially due to postponements of hospitalisation and other elective treatments.
 
However, since May 2020, medical claims have started picking up. It is likely that the recent surge in Covid-19 cases will reduce the number of regular medical claims again. But insurers may see a much higher number of Covid claims as compared to 2020.
 
As of April 28, there were 1.1 million Covid health claims worth Rs 15,568 crore filed with insurers. Of this, 930,729 claims worth Rs 8,918.57 crore have been settled, according to General Insurance Council data.
 
“While Covid-specific products generated strong sales after its roll out in mid-2020, premium growth started to slow towards the end of the year and early 2021. As of end-March 2021, several general insurers reported loss ratios above 100 per cent for Covid-specific covers; these will inevitably require price revisions,” the rating agency said.
 
The chief executive officer of a private general insurance company said, “Covid-specific policies for any insurer, in terms of loss ratio, has been bad. But the normal health policies have not behaved as badly as Covid-specific policies. Up to December, the loss ratios were alright because when Covid claims increased, non-Covid claims decreased. But the moment things started to normalise, non-Covid claims started to rise and Covid claims have doubled in number.”