Insurance companies not offering group Covid covers due to high claim ratio

In contrast, when several corporates including start-ups are seeking to protect their employees against Covid-19, the insurance companies have either exorbitantly increased the premium rates or have completely stopped offering the cover. Experts say the claim ratio for insurance companies have gone up with the increase in severity of Covid cases leading to hospitalisation. This has put pressure on insurance companies to increase the premium or stopped offering the policy.

“Most insurers have stopped promoting their group Covid cover because of the high claim ratio. They have either completely pulled out of the market, or have increased the price by four-fold making it completely unviable for companies to buy a group Covid cover. Interestingly, companies like Digit have been very proactive in the last few months to provide this coverage to SMEs and corporates,” Abhishek Poddar, co-founder and CEO of Plum, a Sequoia-backed company that helps organisations manage employee health insurance & health benefit plans.

Srinath Mukherji, Co-Founder & Director, Sana Insurance Brokers, newly-launched digital health insurance services provider agreed, “Yes, many insurers have withdrawn group COVID covers, possibly due to high claim ratios.”

High Claim Ratio

Experts say when these covid policies were launched last year they were designed based on the statistics available at that point in time. Since then the number of cases has increased sharply leading to high claim ratios.

“Claim ratio in Covid Rakshak policy is as high as 300% while in Covid Kavach, it is around 90%. Pricing is the issue in these policies, as when these policies were launched last year there was no data,” said Suresh Mathur, executive director, health insurance, surveyors, IMF & Reinsurance, IRDAI in one of the webinars organized by Insurance Foundation of India in association with PHD Chamber of Commerce and Industry.

The claim ratio in these Covid-specific policies is very high compared to the claim ratio in individual policies (70%). In the group health insurance, where premium rates have always been lower because of cutthroat competition in the market, the claim ratio is 107-120% for public sector companies and 90% for private companies. The low premium in group health policies is often cross-subsidised by other types of insurance covers sold to the same organisation.

IRDAI Intervention

Earlier in May Insurance Regulatory and Development Authority issued a circular stating that “Some of the insurance companies are not issuing Corona Kavach and Corona Rakshak Policies. In this regard, it is clarified that all General and Health Insurers are mandated to offer Corona KavachPolicy vide guidelines dated 26.06.2020.”

The circular stated “In the wake of rising infection rates due to the second wave of the Covid-19, the insurable public require appropriate health insurance coverage and it is not correct to deny such coverage to the customers in this crucial time. All insurers are advised to ensure that wherever Corona specific standard products have been filed and approved by the Authority, the same should be offered to the customers according to the insurer’s underwriting policy. Similarly, where the underlying corona specific product enables the insured to renew the policy as specified in the above referred circular dated 13.10.2020, insurers are advised to renew such policies subject to the underwriting policy of respective insurers.”