How Covid-19 is affecting your Group Term Insurance

The group term insurance business has been going through rough times. First companies faced trouble renewing policies because perceptions about India has changed globally due to the increasing number of Covid-19 cases, leading to reluctance in writing group term insurance by foreign reinsurers.

Now insurers are grappling with high claim ratios as the growing number of people have succumbed to Covid-19. For example one of the leading insurance brokers told Money9 that a manufacturing company with a group size of 1450 employees has been having group term insurance for the last 3 years and had paid a net premium of Rs 46 lakhs last year. The company used to have 1 death in a year. This year being not a normal year the company has already seen 11 deaths (includes 4 normal deaths ) and 6 weeks are still to go.

The claim figure is Rs 98 lakhs, which is 213 % of the premium paid by the client. The question is when insurers are facing claim ratio what will they do going forward. Will the insurer come up with a premium of Rs 120 lakhs or more or will it simply refuse to quote?

S. Sethi, founder and Director, RIA Insurance Brokers, said, “Assuming the premium quoted will be very high the chances are that client will drop the idea of group term insurance. My suggestion to them will be to reduce the sum assured to 50 % of the sum assured of the current year and negotiate for a premium of Rs 75 lakhs.”

India recorded 3,66,317 new Covid-19 cases on May 10. 3,747 with new deaths being registered. The country has so far reported a total of 2,26,62,410 cases and 2,46,146 deaths.

“This is not a blanket scenario, as it can be very company and product-specific. Risks perceptions have changed globally, leading to higher claims expectations in some lines. Correspondingly, premium rates would have to change. Given the uncertainty, there might be some caution, even reluctance in writing group term insurance business,” said Alok Kumar, founder and CEO, SmartCover Solutions.