Insurance premiums may go up on Covid-19 third wave fear

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If you haven’t bought life and health insurance policies yet, you should do it at the earliest. Industry players believe there could be another round of hike in health and life insurance premium in the next three to six months owing to hike in number of death claims and hospitalisation during the second wave of the Covid-19. The insurers are gearing up for the third wave of Covid-19. They have hiked provisions.

“I see prices of health and life insurance plans hardening certainly over the next three to six months. The insurers are reevaluating the morbidity and mortality rates. The prices have already been hiked by 15-20% in group insurance policies. Individual life and term plans will also see a revision,” says Vedanarayanan Seshadhari, MD, Mahindra Insurance Brokers.

Trends

IndiaFirst Life Insurance, among other insurers, had hiked the premium on term insurance plans by up to 25% in April 2021 It sees another revision in pricing only if reinsurers revise the premium for life insurers.

“Nobody knows how Covid-19 will pan out. We are dependent on reinsurers. They have not increased the pricing yet post second wave of Covid-19. If there is a third wave and vaccination drive does not proceed as anticipated, there could be an increase in premium, but I expect the vaccinations to go through smoothly,” says RM Vishakha, Managing Director and Chief Executive Officer, IndiaFirst Life Insurance.

Financially hit-hard

The insurance companies have recorded huge losses due to Covid-19.

“Even big ones which had been recording profits for 10 years in a row have experienced losses. With the third wave expected, the prices could rise again. There is no way the Insurance companies will be able to sustain at current prices. A large part of provisions made this financial year exhausted in the second wave itself,” says an industry source on condition of anonymity.

Vishakha says it is a general practice to adjust provisions based on the experience.

“Covid deaths led to 30% increase in claims. So, we have accounted for higher provisions,” she says.

Similarly, MaxBupa Health Insurance has maintained enough reserves and healthy solvency ratio of 2.2%.

Bhabatosh Mishra, Director Underwriting, Products and Claims, Max Bupa, feels the Covid-19 impact will be transient.

“The jump in Covid-19 claims has been short-lived during the first and the second wave. I expect the same happening in the third wave,” he says.

Is a hike on the cards?

The health insurer says it did not hike the prices post the first wave and the second wave of Covid-19.

“We did not hike prices even in 2019 after IRDA had allowed hiking the premium by 5%. If and when we revise the prices, Covid-19 alone won’t be a reason for this. Covid-19 impact is seasonal. In our pricing, we look at long-term factors and past experience,” he says.

Irrespective of price revision, it makes sense to protect yourself before the Covid-19 risk knocks on your door.