The Insurance Regulatory and Development Authority of India (Irdai) has mandated all general and standalone health insurance companies to offer the ‘Corona Kavach’ indemnity health insurance policy for covid-19 from 10 July. Other than this, insurers have also been encouraged to offer a standard fixed-benefit product as well as short-term covid-19-specific policy. You can find the product features here.
According to insurers, the intention behind mandating a product for covid-19 is to ensure that the uninsured population has some amount of financial cushion. However, the price has a big role to play, and offering short-term products for covid-19 at affordable premiums may not be possible, said insurers.
“As an insurer, we’ve still not seen the peak rate for covid-19 and per day reported incidence is expected to increase. The higher the number of tests, the higher will be the incidence rate. These are some factors that insurers will have to take into account before deciding on the premiums," said Parag Ved, executive vice president and head-consumer lines, Tata AIG General Insurance Co Ltd.
Insurers are not allowed to have zone-based or geography-based pricing for the standard covid-19 products, and insurers believe this too will impact premiums. Further, the nature of these policies is short-term, which means insurers may end up seeing a spike in claims in a small period of time as against regular health plans where claims are spread across the year.
“We will be covering the peak risk period because we’re entering a phase where cases are increasing sharply. By the time the risk goes down, the policy period will end because it’s a short-term policy so the premium will have to be adjusted accordingly. The policies will be priced keeping in mind the expected incidence rate of the future and the demographic spread of the risk," said Ved.
The tenure of the policy could also have an impact on premiums. Insurers said premiums for a 3.5-month policy could be higher than a 9.5-month one.
The standard indemnity policy shall cover the cost of personal protective equipments (PPEs) and home treatment as well as any co-morbid conditions (even if they are pre-existing) arising out of covid-19. However, insurers we spoke with said that they may choose not to cover customers who are at a higher risk of contracting the infection or the premiums for such individuals could be significantly high.
Adarsh Agarwal, appointed actuary, Digit Insurance said, in April, the total testing-to-positive ratio was only about 4%, and now it’s about 10%. Agarwal said unless we have a vaccine, the number of cases by the end of the year will be very high.
“With the indemnity policy also paying for homecare expenses, the frequency of claims will go up but the size could be smaller for home treatment. However, in regular health policy, the claim is payable only on hospitalization and not all may end up being hospitalized. Given these factors, our view is that the premium for this policy could be higher than some of the affordable plans such as Arogya Sanjeevani," he added.
With hospitals running out of beds, homecare could see a rise, and to cater to demand, healthcare providers are coming out with packages for home treatment, and some insurers believe these packages may not come cheap.
The premiums for Arogya Sanjeevani, which also is a regulator-mandated health policy, vary from insurer to insurer. According to Policybazaar, for a 30-year-old, the premium charged by Raheja Health is ₹3,190 plus GST whereas the same policy from HDFC Ergo General Insurance costs ₹7,352 plus GST for a ₹5 lakh cover. An industry expert, who didn’t want to be named said premiums for Arogya Sanjeevani are decided based on the premiums of the insurer’s flagship product for the same sum insured.
Premiums for flagship products are generally on the higher end of the spectrum in terms of pricing. Religare Health’s flagship product for a ₹5 lakh sum insured costs ₹6,600 and the Arogya Sanjeevani policy costs about ₹6,000 whereas Raheja QBE’s flagship policy costs ₹4,700 and the Arogya Sanjeevani product costs ₹3,700.
“Though the features of the flagship policies may not be very different, depending on the claims ratio and how aggressive an insurer wants to be with the pricing, the premiums may be very different. The same could happen with standard products for covid-19 as well because insurers may want people to opt for their flagship products instead," said the spokesperson quoted above.
While these policies target covid-19, insurers estimate they may not come cheap. We will update the readers as pricing gets clarity.
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