Growing with change — the impact of Covid pandemic on insurance sector

This pandemic has adversely affected not just individuals but businesses as well. The
insurance sector is no different and had to go through considerable turmoil during these uncertain times. Traditionally, insurance premiums and possibilities of losses were drawn by actuaries based on specific trends and patterns over several years. However, we were thrown a curveball that virtually none of the companies in the insurance spectrum or reinsurance sector anticipated.

Stakeholders of the insurance ecosystem are trying to get their heads around some of the developments in this situation.

Insurance companies & IRDAI

We have nearly seen a stock market-like scenario in the pricing of Covid policies. The
premiums, coverages, and exclusions would change virtually every week to accommodate or account for the claims experience. We are also continually witnessing a similar situation for the Overseas Travel policies. At the same time, the Term Life Insurance Market has seen a significant rise in the premium as reinsurance companies raised their premium rates. The Free Cover Limit was also substantially reduced. Meanwhile, IRDAI introduced standardised Covid Policies for all insurance companies to offer on a retail basis.

Corporates

Initially, corporates struggled to work from home (WFH). Subsequently, there was a sudden increase in demand for Covid-related treatment and coverages in their insurance plans, even though these are covered under the Group Mediclaim Insurance Program. The sum insured provided by most corporates came under sudden pressure due to the highly contagious nature of the virus. Corporates either had to take additional ‘Sum Insured’ through a separate insurance program or go for Covid specific policies.

Brokers

Very few brokers comprehensively demonstrated their business continuity plans during this lockdown. Meanwhile, to keep up with client engagement, broking companies explored various methods. Investment in technology platforms paid off to keep up communication with clients and employees of clients. Online wellness programs also provided engagement to WFH employees while tackling a wide range of issues like depression, lack of physical activities, parenting, etc. The insurance broking sector will require the right structure of benefits, high-level analytical tools, and predictive analytics to build more robust programs.

We are now in calmer waters, as our nerves are soothed due to the vaccination, but will life ever be the same again, post the unlocks and the locks? Insurance companies are learning a new chapter and reality that they had not anticipated. Surely and steadily, the industry is making small course corrections for offering broader insurance programs while preparing for the next big thing. Will there be differential premium rating for with vaccination and without vaccination? That remains to be seen.

(Jayesh Gadekar is the Head – Health & Benefits, Innovative Solutions, GLOBAL Insurance Brokers)