The coronavirus outbreak has affected all aspects of human life in the last two months. The deadly COVID-19 has affected around 3 million people worldwide. Many governments have taken steps such as lockdown to contain the spread of Covid-19. A large number of people have turned towards buying insurance from insurance companies for their safety.
Unsurprisingly, the novel coronavirus has left no sector unaffected. And the financial sector and the insurance industry are no exception. In some cases, insurers have started taking action to protect their businesses that left many consumers in dilemma. While others in the insurance industry are being forced into action for the customers’ benefit by the governments' emergency responses to the virus.
Policybazaar has revealed that it has seen a growth of nearly 25-30 percent in both health and life insurance sales during the lockdown period. It also expects a 30-40 percent growth can be witnessed in the online insurance segment. Edelweiss Tokio Life Insurance says it has seen a 45 percent jump in new online business logins during this period of restrictions.
At the same time, dissatisfaction among customers has increased as businesses and consumers realize that many basic policies do not cover the impacts of a global pandemic and are publicly expressing their worry. This situation is largely due to customers not fully understanding insurance coverage but also partly due to insurers using legalese and long, complicated terms and conditions.
Many businesses, event managers, and restaurants are claiming their insurance due to losses they are going through. But many firms are unwilling to accept their claim. These people buy insurance based on which policy is the cheapest and such low quality policies rarely cover unexpected or unusual events like global pandemics.
As insurers try to deal with an increased volume of claims and customer queries, they face increasing calls in the press and on social media to help individuals and businesses who suddenly find themselves in serious trouble. It is worsening the situation, resulting in long wait times for responses and further customer dissatisfaction.
What is experts’ take on insurance policies?
Industry experts say that the claim settlement process for covid-19 related cases will remain the same as other illnesses. Apart from hospitalization charges, most health insurance policies will also cover post-hospitalization expenses incurred during the recovery period.
Mayank Bathwal, CEO of Aditya Birla Health Insurance, said,
“This is not the first time of a virus outbreak. There have been Ebola, Zika, Nipah in the past, and coronavirus is just another one such outbreak. A health insurance policy covers all types of infections and coronavirus will also be included. Anyone who is hospitalized for 24 hours as a result of coronavirus will get coverage.”
Reliance General Insurance stated,
“Since COVID-19 is a new disease and does not come under pre-existing disease, it will be covered under your base policy. Hence, the insured will be provided with all the covers, including in-patient treatment, pre and post hospitalization, and other test and diagnosis on coronavirus related coverage.”
Edelweiss General Insurance said,
“We have decided to cover hospitalization for not only those who have a confirmed diagnosis but also those who have been quarantined in specific facilities identified by the government. The coverage amount is up to the sum insured under the policy. For the quarantined patients, the health policy ensures coverage for the entire period of quarantine with up to 100% of the claim amount being paid against quarantine and detection charges."
The impact on insurance industry is unusual
A global pandemic is considered as the biggest, unfathomable risk to the insurance industry. Thus, most of the insurance companies seem to have taken little action to deal with such outbreaks. Customers may perceive that these firms are large organisations out for themselves but there are enormous risks to insurance businesses, the scale of which we have rarely seen before.
Insurers and re-insurers are losing out on huge exposure as major events across the globe get cancelled. For instance, Munich Re, a German Reinsurance company, is tied to the Olympic games which has already been postponed. It's a big dent for a huge firm like Munich Re but is manageable given the coffers of such large scale players in the insurance industry. But for smaller firms that specialize in event insurance and offer communicable disease cover, the ongoing cancellation of events of all sizes might lead to permanent closure.
Due to collapse of individual life and health insurance, life insurance companies could be particularly hard hit by the combination of falling stock markets and increasing claims. Paying out on policies will be a huge loss to both insurers and re-insurers. It's serious, unprecedented losses we're talking about here.
Additionally,the failure of many global businesses like the airlines industry (one of the earliest casualties) and hospitality chains is likely to follow. Firms of this size are more likely to have comprehensive cover. So having to pay out on policies that include contagious disease cover will add more to the ongoing burden on the insurance industry.
The pandemic is incredibly serious for the insurance industry. Around $3oo million is expected to be paid out in COVID-19 related claims, the majority of which will be for cancellation cover. This might increase depending on the government’s directives and strategies to cope with the testing times.
How insurance companies are dealing with the situation
The Insurance Regulatory and Development Authority of India (IRDAI) had issued guidelines for health insurers asking to accelerate coronavirus related claims settlement in case of hospitalization. IRDAI has already asked health insurance companies to offer medical coverage for coronavirus infection in India. The Life Insurance Council also said the clause of 'force majeure' will not apply in case of COVID-19 death claims.
The regulator has also instructed insurance companies to design specific health policies covering the treatment cost of COVID-19 which includes the medical expenses needed during the quarantine period. Some insurers have already introduced the same.
On the other hand, seeing business opportunity amid the spread of the coronavirus pandemic, insurance companies have started offering policies specific to COVID-19 and are partnering with digital payment service providers to increase the sales of such plans.
Bharti AXA General Insurance has tied up with Airtel Payments Bank to launch two health insurance plans. One offers a large amount of Rs 25,000 and another with daily benefits starting at Rs 500 per day to provide protection from COVID-19.
Similarly, in partnership with Bajaj Allianz General Insurance, Flipkart Online Services owned PhonePe launched a coronavirus hospitalization insurance policy called "Corona Care". The policy is priced at Rs 156 with an insurance cover of Rs 50,000 for a person under 55 years of age, and the cover is applicable at any hospital offering coronavirus treatment.
Other insurance companies like Star Health Insurance and Edelweiss General Insurance have also come up with exclusive insurance policies for COVID-19. In fact, Edelweiss General Insurance has extended hospitalization coverage to quarantined cases that have not even been diagnosed positive.
Some insurers are also offering products to cover expenses, including treatment during quarantine period. The terms of claim settlement by these companies vary and a buyer must read the document carefully before purchasing an insurance plan.
During the dengue outbreak, several insurance companies came up with policies to protect from vector-borne diseases. There are many existing health insurance plans in the market which provide protection from the COVID-19 disease.
In fact, most of these insurance companies offering specific polices for coronavirus are not asking their potential customers to go for medical check up. Instead they are making sure that their consumers do not have coronavirus-like symptoms.
Though some insurance policies don’t have the clause of covering pandemics and epidemics, industry experts believe all companies will have to comply to IRDAI’s strict directive. The regulatory directive is so clear that claims reported under Covid-19 should be reviewed thoroughly before rejecting any claim.
This is a worldwide emergency and any claims related to coronavirus should not be rejected. The policies should not have pandemic exclusion. Moreover, it is advised that policyholders check with their insurers about the terms and conditions of the policy to avoid hassles at the time of making claims.