HEALTH INSURANCE - Will Corona Kavach, Rakshak policies' premiums RISE as products prove to be loss-making - HERE is what customers must know

Insurance policies Corona Kavach and Corona Rakshak have turned out to be loss-making products for most insurers, prompting them to seek for a re-pricing from the regulator as the high claims payouts are eating into their profits.

"It has turned out that Corona Kavach and Corona Rakshak have been making losses for most of the insurers. All of us launched these products in July (last year).

"We are severely under-priced on Corona Raksha and Corona Kavach policies," a top executive from a general insurance company told PTI on the condition of anonymity.

Based on data available till June this year, the official said comparing the peak of the pandemic of other countries and of India, the country's peak was higher than the other countries.

"Our second peak has been double of our own peak and higher than any other country in the world. And, I would be surprised if this product is making money for any of the insurers," said the official.

The official said most of the insurers and the reinsurers have asked the Insurance Regulatory and Development Authority of India (Irdai), for re-pricing of these two policies.

However, the official said it would be difficult to suggest what kind of price revision they are seeking as it differs from company to company.

Another official from the industry said, "As per my understanding, Corona Rakshak and Corona Kavach are loss-making policies for the insurers.

"Given that there are such huge underwriting losses, companies have been speaking to the regulator that an increase in the premium will help (them). In life, we have already seen an increase in premiums," said the person cited above.

According to an ICRA report in June this year, based on analysis of the performance of 17 general insurance companies representing 90 per cent of the industry-wide gross direct premium written, the industry's underwriting losses are set to rise this fiscal due to higher claims payout.

Of these, the government-owned insurers are expected to report high underwriting losses of Rs 12,400 crore to Rs 13,500 crore in the current financial year mainly on account of likely high claims ratio on health and motor portfolio.

"Non-life insurers have settled mediclaims worth Rs 24,000 crore till date since the onset of the pandemic," Ankit Agrawal, founder and CEO of InsuranceDekho, said.

To address the financial protection needs related to the costs of COVID-19 treatment, Irdai had designed these two COVID-19-specific products after the spread of the pandemic last year.

Corona Kavach is an indemnity-based standard health policy and Corona Rakshak is a standard benefit-based health insurance policy.

All general and health insurers were mandated to offer Corona Kavach on or before July 10, 2020. While all the insurers (general, health and life) were asked to launch Corona Rakshak policy by the same date.

Corona Kavach has sum insured options ranging from Rs 50,000 to Rs 5 lakh (in the multiples of Rs 50,000). Corona Rakshak has sum insured in the range from Rs 50,000 to Rs 2.5 lakh (multiples of Rs 50,000).

Both the policies come with options of three policy durations -- three-and-a-half months; six-and-a-half months; and nine-and-a-half months.

Lifelong renewability, migration and portability are not applicable on these two products. These can be availed by persons in the age group of 18-65 years.

As these policies are of short durations, the insurers encourage the policyholders to get a comprehensive health policy, said the first official cited above.

"This will give them comprehensive insurance coverage. Based on the pricing and our own experience, Corona Rakshak will require far more pricing because the loss ratio, for some of us (in the industry), is in excess of 1,000 per cent," the official said.