KEEPING INSURANCE HUMAN
02 Aug, 2021 | Weekly

Weekly Insurance Round-up | Monday, August 2, 2021

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Hello Everyone! 

Here's the first edition of Beshak's Weekly News Round-up - an analysis of all Insurance News & Updates from our in-house research team. Hope you have a good read, and don't forget to share your feedback with us! 

Take a deep-breath, and dive right in! 🤿


What's inside?

Health insurance as an industry is seeing growth - driving the non-life insurance sector 🚀

  • Quarter 1 results of FY 2021-22 are out. Driven by the rising awareness and demand for health insurance, the general insurance industry grew 13.8% in the first quarter of 2022 (April-May-June 2021), compared to the same quarter last year, a report by Care Ratings, published in Financial Express said. 
  • The health insurance vertical made a total premium collection of INR 17,497.1 crore, indicating a 31% growth compared to the same quarter last year. 
  • As a result, 39.4% of the entire general insurance business today is driven by health insurance, which continues to be the largest contributor to this sector’s growth.
  • A large percentage of mediclaim sales are contributed by standalone private insurance companies that grew by a whopping 55% collecting  over INR 4222 crores in premiums during the quarter. 

Source 👉: Financial Express

The impact of Covid19 Wave-2 on health insurance companies 🦠

  • Insurance companies are in a fix. While on one hand, they see a rising demand for their products like never before, on the other, they are reporting alarming losses due to an upsurge in COVID related hospitalisations (1 Mn claims) in the Quarter 1 of FY2022.
  • For instance, ICICI Lombard reported an underwriting loss of INR 508 crores in the first quarter of 2022, compared to last year when they reported an underwriting profit of INR 38 crores, according to a recent news report published in Moneycontrol. 
  • Losses were equally drastic across retail/personal insurance and group health insurance covers -  Retail loss stood at INR 182.81 crores (12X last year); while group loss stood at INR 413.17 crores (15X compared to last year). 
  • The health claims frequency assumptions made for the second wave were way lower compared to the actual claims that came in, resulting in a severe burden on the cash-flows of the insurer. 
  • Impact: This scale of loss is driven largely by the unpredictable impact of the Covid19 pandemic on the industry. It’s not clear whether this will result in further hikes in health insurance premiums. Some experts believe that the second wave was the worst we would see, and that the industry would return to the pre-pandemic situation with better vaccine availability - and hence, premiums might not be hiked. Some others opine that we’re on the brink of a third wave, and that could make things worse- and hence, could lead to an increase of premiums. 

Sources 👉: Moneycontrol | Business Standard

Life-insurance sector impacted by Covid19 Wave-2 ☂️

  • Similarly, the life insurance space too has seen a 4-5 times increase in Covid-related death claims in the last one year, said a story published in the Indian Express. This is likely to result in re-insurers further holding back supply on protection covers like term life insurance. 
  • It would probably be very difficult to get term insurance - especially for people with unpredictable incomes, lower qualifications. The eligibility criteria has already been tightened since early 2020, when reinsurers pulled back on user-friendly practices they had offered earlier, like instant issuance of policies, waiver of medical tests, waiver of financial documents etc. The supply of term insurance is likely to remain restricted until things get back to normal. 
  • Group Term Life insurance is also seeing pull back from Insurers. A  few insurers like HDFC have reportedly withdrawn from group term life offerings, citing low margins due to competition. Many others have reduced the maximum cover amount available without medical tests, and also hiked their premiums. The average cost of group term life has increased by 2X.
  • Further, according to a news story in Times Now, mutual funds that offered term life as a complimentary or free add-on with SIPs have withdrawn such covers. 
  • Impact: People will face longer, more tedious processes while buying term life insurance, going forward. It’s important that they are educated on this development, so their expectations are set right, before buying term insurance. People who are currently not getting term insurance due to medical history or income declaration, might want to wait and watch for a year for things to return to normalcy. Alternatively, (and strictly for the time being), they can apply for Saral Jeevan Bima.  It’s always better to have some cover, than no cover at all. 

Sources 👉: The Indian Express | Moneycontrol | TimesNow 

Hospitals revise tariffs citing COVID management costs.💸

  • Based on an article in the Indian Express last week, we learnt that non-Covid expenses in healthcare too have seen a steep rise in the last year. While there were no cost revisions of surgery packages in the last 5 years, this year hospitals are charging as much as 25% more towards Covid-management charges - such as costs for additional tests, additional days of hospitalisation (waiting for RT-PCR test reports), cost of sanitisation, hygiene, PPEs etc. 
  • Policybazaar has already reported an increase in the average claim size to 2X, from 40K to 80K 
  • For instance - A knee-replacement surgery which was charged as a package cost of INR 3.5 lakh in 2019, now is quoted for INR 4 Lakhs, by the same hospital. 
  • Impact: If COVID management becomes a norm at hospitals in the future, this additional cost will have a direct impact on the profitability of insurance companies, thus resulting in higher premiums. 

Source 👉: The Indian Express

Investments in Insurance that were in the news 💰

  • Star Health IPO: Star Health is planning a public share sale to raise at least ₹2,000 crore, the IPO is likely to be a mix of primary and secondary share sales by the company and the investors. (Source 👉: MoneyControl)
  • Policybazaar IPO : Policybazaar aims to raise INR 6,500 crore, in an IPO offering, possibly involving a fresh issue of shares, as well as sale of shares by existing stakeholders. (Source 👉: The Economic Times)
  • Even fund raise: A healthcare membership company that aims to provide an alternative approach to health insurance raised $5 million in seed funding in a round led by Khosla Ventures. (Source 👉: Yourstory)

Updates on Digital adoption in insurance🤖

Digital adoption in fraud investigation

  • A survey conducted by the Insurance Institute of India, with industry executives reported that 92% of insurance companies will continue the use of technology in investigations even after the pandemic. Ironically though, more than half of them suggested that the budgets allocated to such automation and technology were reduced. 

Source 👉: Outlook India

ICICI Lombard testing Cashless OPD

  • As per a press release, ICICI Lombard has partnered with Dr. Reddy’s Lab to launch a cashless outpatient offering starting in Hyderabad and Vizag. In this pilot project consumers can avail outpatient services such as doctor consultation, diagnostics, and pharmacy that can be accessed through ICICI Lombard’s mobile app ILTakeCare. 
  • Covering OPD under health insurance (that is primarily a hospitalization cover) has been a long standing demand from the insurance customer, especially the younger lot, who find hospitalization an unlikely possibility in their young age. 
  • Given the risk of frauds (thanks to the fragmented OPD industry) insurers need robust technology to provide OPD covers efficiently. This joint venture is hence a welcome development. 
  • Of course, there have been many such experiments in the past that haven’t scaled well. For instance Apollo Munich (now HDFC Ergo) partnered with Practo to offer similar services, but did not find enough takers. Hope this time it is different and we get to see good OPD covers in the country soon. 

Source 👉: Financial Express

Other Important News ⚠️ 

INR 24,586 Crore unclaimed insurance

  • According to a news report in The Economic Times, an amount of over INR 24,586 crore lying unclaimed across public and private insurance companies as of December 2020. Such amounts that are unclaimed for over 10 years are transferred to senior citizen welfare funds on a yearly basis. 
  • Amongst others, there are two reasons that stand out. One - when families are unreachable when a claim is triggered by the policy (ex: maturity, annuity payments etc.) or two - the beneficiary (policyholder or nominee) initiates a claim, but fails to fulfill the documentation requirements asked by the insurer.
  • The need for a financial advisor is established clearly here. Both these situations are easily avoidable when policies are purchased through a good financial advisor, who would act as a trusted point of contact for the family to reach out to, and help them complete the documentation properly. 

Source 👉: The Economic Times

Union Cabinet approves DICGC Bill 2021 ensuring Rs 5 lakh for depositors in case a bank fails

  • The need for such an insurance or assurance has seen active demand after the fall of PMC bank. In the past, the average wait time before the customers could withdraw their money was reportedly 508 days (over 16 months).
  • Based on this news article in The Indian Express, depositors can withdraw upto INR 5 lakhs (with earlier was INR 1 lakh) within 90 days, if a bank fails. 
  • The bank is placed under a moratorium by RBI in the first 45 days and depositor claims are submitted to DICGC. Once this information is reviewed, the depositors are paid within the next 45 days. 
  • With this change, 98.3 per cent of all deposit accounts and 50.9 per cent of all deposits by value — will be covered. 
  • Compared to the global average of 80 percent of accounts, and 20-30 percent of the deposit value covered, this places small depositors in India, in a much better position. 

Source 👉: The Indian Express

Team Beshak
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