Imapact on Insurance Sector due to COVID-19

Jul17,2020 #COVID-19 #IRDA
Imapact on Insurance Sector due to COVID-19

By Aashna Bhutani

The coronavirus outbreak which was declared as a global pandemic is leading to widespread concern and is increasing economic hardship for all consumers, businesses, and communities. Since the private sector has now been allowed to treat COVID – 19 patients, insurers have been getting health insurance claims. .COVID-19 is affecting the insurance industry in multiple ways; from employee insurance and continuity of business issues to client service obligations and finally to sustain the financial outlook of the company. India is among the top worst-hit countries by COVID-19, which has impacted almost all industries and sectors across the world, including the insurance industry. Since details around COVID-19 treatment and prognosis are still emerging, insurance companies do not have data related to patients, profiles, morbidity rates, cost of treatment, etc.

Also, if the policyholder is diagnosed with COVID-19 after the settlement of the add-on benefit, then he or she will be eligible only for the balance amount of the total policy benefit

Health insurance industry

Due to the widespread COVID-19 pandemic, health insurance companies are facing various challenges and are foreseeing an impact in the following areas:

To dispel any general misconceptions about the applicability of health insurance policies to cases of COVID-19, the IRDAI has instructed insurers to accept COVID-19 related claims under active health insurance policies. Since the risk of COVID-19 is not currently priced under active products, these claims may cause an additional burden on the books of insurers if treated outside government hospitals.

Apart from various other things, a nationwide pandemic can result in a significant increase in claims for health insurance companies beyond just COVID-19.

IRDA is the regulatory body in India that governs both Life insurance and general insurance companies. Insurance in India dates back to the year 1850 with the first General Insurance company established in Calcutta. Soon, with the passage of years, the market became competitive as many insurers started emerging both in life and non-life sectors.

Over time, new demands rolled and the market got flooded with several insurance products. As a responsible head of the family would act to prevent the family from any damage, IRDA monitors the development of the insurance industry and other related activities.

GUIDELINES ISSUED BY IRDA

HEALTH INSURANCE

 Most insurance service providers have now started covering the medical expenses and treatment for COVID – 19 in their policies. In light thereof, the Insurance Regulatory and Development Authority of India (IRDA) has issued guidelines for meeting health insurance requirements of various sections and has advised the insurance companies to design products covering the costs of treatment for COVID – 19.

However, these were a general set of guidelines and might or might not apply to all insurance policies.

With regards to Health Insurance Contracts, IRDA  dispensed with the directions to the insurance companies to provide for specific information, product-wise pertaining to the admissibility or otherwise of COVID – 19 claims to be provided on the website.

The IRDA  directed the insurance companies to condone the delay of up to 30 days in the renewal of health insurance policies without deeming such condonation as a disruption in the policy. However, IRDA also laid down the guidelines for the insurance companies to contact the insurance policyholders, well-in-advance so as not to have discontinuance in coverage.

The Insurance Regulatory and Development Authority of India is said to have withdrawn the draft guidelines it issued on a standard COVID-19 health insurance product and has instead proposed a benefit-based product to address the insurance needs relating to the coronavirus infection

Early in June, Irdai sent draft guidelines for a standard COVID-19 health insurance product to all general and stand-alone health insurance companies. It was a one-year indemnity policy with the option of only two add-ons. Insurers were asked to offer the product starting 15 June.

According to the new draft guidelines, the minimum sum insured under this policy would be ₹50,000. You can opt for a sum insured in multiples of ₹50,000, up to ₹5 lakh.

The proposed product shall be called “Covid-19 standard individual benefit-based health policy” followed by the name of the insurance company.

It is a one-year benefit-based product. In other words, it will pay a lump sum benefit equal to 100% of the sum insured to the policyholder if he or she tests positive for COVID-19 and is advised hospitalization. The product provides one add-on: a quarantine cover. According to the guidelines, if the insured person is quarantined due to suspected infection, then 50% of the base sum insured shall be payable.

Life Insurance

 The IRDA  issued directions to the insurance companies for extending the Grace Period, by one month, for payments due in March 2020, in the areas where lockdown has been declared by the State Government.

The  IRDA directed insurers to settle Life Insurance claims of COVID – 19 to be settled expeditiously to suit the emergency in the affected areas.

Further, IRDA directed the insurance companies to process the claims arising on account of COVID – 19 promptly and efficiently.

 IRDA issued directions to the insurance companies for providing information on the website about admissibility, or otherwise COVID – 19 death claims, for all the products covering the contracts already issued to the policyholders.

Impact & Communication

All the major insurance companies extended the grace period for paying renewal premiums in March. Life Insurance Corporation (LIC)  also extended the deadline up to April 15, 2020.

In cases where offices are not functioning fully or partially, the policyholders are mandatorily be notified by SMSes, e-mails, and press release, besides, to display boards and pamphlets in the brand offices.

To ensure proper service to policyholders and customers, all the insurers have been asked to maintain continuity of business operations through possible alternate modes including telephonic and digital contact. All insurance companies have been asked to display on their websites, the information on the functioning of their offices and the alternate arrangements made for premium payments, renewal, settlement of claims and lodging or other service requests.


Also, digital payments and other online facilities are to be ensured for the smooth delivery of services and entertainment of claims.

Employees and Health Workers

IRDA  issued guidelines for health insurance policies, medical expenses, etc. implementation of which would require a consultancy on case to case basis.

However, these are a general set of guidelines and might or might not apply to all insurance policies. On a general note, any health insurance policy provided to the employee by the employer would cover the risks associated with COVID – 19

The said insurance cover also includes accidental loss of life on account of contracting COVID – 19. The insurance provided under this scheme would be over and above any other insurance cover availed of by the beneficiary.

Relaxation to companies

IRDA issued directions to the insurance companies to ensure proper service and maintain continuity of business operations through possible alternative arrangements including telephonic and digital contact.
and the insurance companies have been directed to display the information on their website for making payment and functioning of their office.

The IRDA relaxed the conditions for Board Meetings of insurers thereby stipulating that the meetings due to 30.06.2020 may be held through video-conferencing or other audio-visual means per Rule 3 of the Companies (Meetings of Boards and its Powers) Rules, 2014 as amended on 19th March 2020.

The IRDAI extended the period for submission of monthly returns for March 2020 by the insurance companies and intermediaries by allowing them an additional period of 15 days. Furthermore, for submission of quarterly returns, an additional period of one month will be permitted.

Though the normal response time for policyholder complaint redressal is 15 days, however, due to pandemic situation, an additional 21 days are allotted to the policyholder in respect of all complaints received.

The various guidelines issued by IRDA during COVID 19 pandemic ensured that the interests of the insurance companies and the one taking services from these companies is protected as IRDA.

IRDA has provided various relaxations to insurance companies as well as insured such as the grace period allowed and the filing of the returns by companies and intermediaries, and by extending the dates for renewal of insurance policies expiring during this time, and various other steps during this pandemic were very beneficial.

In light of this challenging situation prevailing in the country, IRDA’s decision to take such steps in the right direction and consumer-friendly.

References:

  1. https://www.financialexpress.com/money/irdai-mandates-standard-covid-19-cover-from-june-15/1988876/
  2. https://www.inkl.com/news/will-irdai-s-new-covid-19-health-insurance-that-pays-a-lump-sum-benefit-you
  3. https://www.livemint.com/insurance/news/extra-time-for-policy-renewal-premiums-how-insurance-companies-are-combating-covid-19-11585882392881.html
  4. https://www.mondaq.com/india/insurance-claims/922300/relaxations-granted-by-sebi-and-irda-on-account-of-covid-19-pandemic

https://www.irdai.gov.in/ADMINCMS/cms/NormalData_Layout.aspx?page=PageNo4137

Related Post