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The high mortality rate witnessed during the second wave has started reflecting in the high claim ratios reported by life insurance companies. HDFC Life on Monday while sharing the first-quarter results revealed that the company witnessed a steep rise in death claims of around 3-4 times of the peak claim volumes in the first wave. HDFC Life paid over 70,000 claims in Q1, 2022.
On the back of reserving for excess mortality, profit after tax dipped by 33% at Rs 302 crore compared to Q1 FY21. The life insurer has created an excess mortality reserve of Rs 700 crore for potential adverse mortality. In the note to the exchanges, the company stated, “Our continued approach would be to review the adequacy of this reserve at periodic intervals based on emerging experience. The strength of our balance sheet and back book surplus has enabled us to absorb the shock of heightened claims, whilst continuing to deliver growth.” HDFC Life currently maintains a solvency position at 203% against the statutory minimum requirement of 150%.
Earlier, Kotak Mahindra Bank announced about its wholly-owned subsidiary Kotak Life that “Due to increased claims and higher mortality related provisioning arising on account of the second wave, the company expects to incur a loss for the quarter ended June 2021 in the estimated range of Rs 225-275 crore on shareholder’s account.”
According to a recent report by Motilal Oswal Financial Services, against the total covid-related deaths of around 1,63,000 reported in FY21, the fatality count has already increased to around 1,52,000 in FY22 YTD. The claim experience is thus likely to stay adverse over the next couple of quarters, all the more due to delays in the reporting of claims.
“It appears that claims on individual business have peaked in June and expect them to normalise in the coming months with more people getting vaccinated and a fall in absolute number of infections. Our existing suite of digital assets is available across channels, partners, and employees. This has enabled us to continue providing a seamless experience to our customers, both for servicing existing policies and buying new policies,” HDFC Bank stated.
However, with the growing insurance awareness, new business margins for HDFC Life in Q1, 2022 have seen an improvement on a sequential as well as YoY basis on the back of growth and balanced product mix. The NBM for Q1 FY22 stands at 26.2%, higher than 24.3% delivered in Q1 last year and 26.1% in full-year FY21. Value of New Business stood at Rs 408 crore, a growth of 40% over last year.