Rise in Health & Motor Insurance Premiums after COVID-19 Pandemic

The COVID-19 Pandemic and the widespread lockdown in India can be described as evolving situations. It’s the third phase of nationwide restrictions on businesses.

Barring some exceptions, all sectors and commercial activities are gearing up for a tough year. The insurance industry is no different!

A school of thought suggests that insurers must not pass any share of the burden to customers once the Pandemic is over. The demand for healthcare insurance has gone up. Sales via online channels are up by 30%, and it has been made mandatory for all employers resuming functioning after the lockdown. These developments paint a positive picture; yet, they do not reveal the entire story.

Many insurers are left with no choice but to ensure continuity of the business while addressing fixed costs, reduction in premiums (primarily renewal-related), higher claims outgo, a revised list of regulations/medical condition exclusions, and the overall slowdown of the economy.

Despite multiple challenges, the country’s insurance regulatory body and insurance companies are trying their best to provide as much relief to the customers as they can.

Introduction of corona virus-specific need-based policies, an extension of dates for renewals/deferment of premium hikes for health and motor insurance, and quicker-than-usual settlement of death and COVID-19 medical claims are some of the supporting measures worth mentioning.

The Pandemic, undeniably, has had a devastating effect on people’s lives and countries’ economies. At the same time, insurance products becoming less complicated and more attractive, expansion of coverage, and inclusion of more diseases, are encouraging signs. That being said, industry experts believe that a considerable increase in insurance premiums after COVID-19 Pandemic is inevitable.

Let’s briefly understand how health and motor insurance premiums are calculated and why they could move upwards after the COVID-19 Pandemic.

Health & Motor Insurance Premiums

  • Health insurance premiums depend on various factors including claims settled/policies sold in a year by the insurance company, changing age and disease demographics, product benefits, and new regulations. Medical inflation also plays a part.
  • The IRDAI (Insurance Regulatory and Development Authority of India)regulates motor insurance TP (Third-party) premium. It is revised every year based on the car type, engine capacity, and past claims experience (except long-term policies for cars, where the premium changes every three years).

Why Premiums Will Rise: Role of IRDAI Before COVID-19

  • As per last year’s IRDAI regulations,health insurance is poised for an overhaul with 30th September deadline, and it will come at a cost, an increase in premium.
  • With effect from 1st October,all health policies will look similar, and the language has to be standardized.
  • Insurance companies are revamping their products and adding new features.
  • The scope of pre-existing diseases will be widened.
  • Mental illnesses, Alzheimer, Parkinson, Menopause, Obesity, Ailments contracted due to hazardous activities and other such diseases will be included.
  • Age-related ailments (cataract surgeries/knee-cap replacements) and over 10 modern treatments ranging from Immunotherapy, Oral chemotherapy to Robotic surgeries will be covered under new policies.
  • A moratorium period of eight yearshas been made mandatory. If your health insurance has completed eight years, and during a claim, your insurer discovers that a piece of material information was not disclosed, still the claim cannot be rejected.
  • Some insurers may comprehensively modifytheir products leading to significant price hikes.

The Rise in Premiums: Impact of COVID-19 Pandemic

  • The demand for health insurance is expected to rise as a consequence of the Pandemic. Insurance companies have been asked to offer comprehensive policies either to individuals or groups.

The idea is to enable listed organisations, employers and establishments comply with the Home Ministry’s COVID-19 standard operating procedures.

  • Average treatment cost for Covid-19 patients is very high. Unless the government and the regulator bring in necessary guidelines for hospitals(for reducing the hospitalisation charges), premiums in all likelihood will increase in the coming months.
  • New insurance policy sales (especially non-health covers) are hampered due to the prolonged lockdown, and the claims have started to pile up.
  • A rise in claims filed by customers implies the claims paid by reinsurers to insurers will also go up. As a result, the reinsurance companies may bring a sharp increase in the rates at which they provide covers to insurance providers. It means the policies will have to be made more expensive (through a premium hike) from next year.
  • IRDAI’s 5th March draft proposal of increase in TP motor insurance premiums by 2-10% from 1st April, which has been deferred until further notice, will come into effect.

India is a price-sensitive market where health or motor insurance covers are bought not only based on their quality but also on how cost-effective they are.

Insurance companies may or may not act immediately; however, the health insurance could witness a 5-25% surge in premiums, and your motor cover premiums could shoot up by 2-10%.

The medical inflation rate is snowballing at almost double the rate of overall inflation. More than 62% of healthcare expenditure in India is met out of pocket, and our savings are utilised; leaving us little to spend on other critical requirements.

If you can afford a health cover, you may want to finalize it now and not later, especially when the corona virus cases are spiraling. The costs associated with testing and treatment may prove too much to bear for those who are under insured or uninsured.

Comprehensive health insurance secures you against a variety of undesired circumstances.

There is never an inappropriate time to take a wise step!

Take advantage of the current rates, and at Quickinsure, compare health/motor insurance plans by exploring quotes from established insurance providers.

Sources: IRDAI,Economic Times, The Hindu-Business Line, Moneycontrol.com, Livemint.com, Financial Express, Indianexpress.com, Rediff.com, Business Today, India Today, News18 Network, NDTV, and other information channels.

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