The Indian insurance industry is generally well equipped for major loss incidents, including pandemics; however, the financial implications will take some time to participate and will be disclosed by the insurer. Insurers are responding to the expanding COVID-19 outbreak on many fronts: as claim payers, owners and investment managers. Each has its own discrete confrontation, not only for the insurance industry, but also for the global economy and the general public.
A year that could have been an astonishing one for the Indian insurance industry in terms of premium growth is abruptly tailing into a state where reconciling last year’s numbers seems like an intimidating challenge. The most recent three months of fiscal years were usually the months when collections peaked for the industry.
Now, given the lockdown in the last week of April, premium collections are starting to suffer quite a bit. The blow is huge because most cities are now on lockdown. Due to canceled flights, no travel insurance is taken out by customers. Buying new policies that require insurers to undergo medical tests takes time and delay. There is no more new policy issuance for NRAs or people with current travel history. So, overall, the insurance segment has been hit in many directions.
Insurance Premiums vs. Death Claim Challenge
In addition to the loss of new business premiums, the insurance industry faces a challenge from improved life insurance claims. Although the government has taken a positive approach and went for a total lockdown of 21 days even before the number of deaths rose to double digits. Nevertheless, nothing can be taken for granted, given the early signs of community dispersal becoming evident and the size of the country. Insurance agencies believe it would be too early at this stage to comment on the exponential increase in death claims in life insurance. Subsequently, if India can manage the spread efficiently, there may be a lesser impact on life insurance claims. Speaking of life insurance, a number of organizations will continue to honor claims on current policies in reverse; the price of future policies will rise in rates and the number of policies offering extended cover may fall,
The IRDA clarification
Corona is facing the major challenge that the Indian insurance industry has seen so far. The infection has a pan-Indian reach and there is a very real risk of it spreading exponentially. Treating COVID-19 may require extended hospitalization, which can be expensive. Many people have some kind of health insurance, whether it’s a personal health insurance company. However, since this virus is new, there is a lot of uncertainty whether corona cases are covered by the health policies offered or not. To address the concerns of policyholders and to provide clarity on coronavirus coverage, insurance regulator IRDA issued instructions to insurance companies on March 4. The IRDA law stated: that if the hospitalization is covered, the insurance companies will ensure that the cases related to COVID 19 will be dealt with promptly.
The road ahead
Although insurance companies are included in the register of exempt services with general restrictions of movement under the lockdown, there is hardly any chance of new business. Insurance players with a robust digital infrastructure should outperform others if the number of COVID-19 cases rise sharply (as observed in China and Italy). One of the main challenges for insurers could be to enable replacement work arrangements for their employees and vendors so that they are more flexible and able to deal with rising claims and faster response times.
Impact of COVID-19 on Indian Insurance
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