Challenges the insurance industry is facing during the second wave

Rakesh Goyal

The novel corona virus is proving to be a bigger problem than one ever anticipated. The pandemic shows low signs of containment, and it seems like there isn’t going to be a sigh of relief anytime soon. Industries and businesses worldwide have been hugely impacted since the spread, and now the virus is known to be mutating and spreading even further.

We have experienced something known as the second wave of this infamous disease, proving to be far more lethal and devastating. Steps taken to contain the second wave and the measures taken to limit the spread of the disease have significantly disrupted and created a huge impact on different industries, including insurance.

Since Covid-19 was recognized, insurers worldwide began providing protection and offering coverage with minimum clauses to all the people. Since the impact was devastating, risk mitigation was not completely taken into account by the insurance industry as a business. Due to this, the insurance industry as a whole seems to have dug a deeper hole. Here are some of the factors that are making the second wave challenging for the insurers:

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Coverage and immunity:

Insurance companies have offered coverage against the coronavirus and its immediate aftermath. Various benefits, coverage plans, standard products, dedicated covers and schemes, etc were immediately developed for the general masses to help them fight the battle with Covid-19. The IRDAI has also given out several notifications in order to make the process easy for the policyholders to deal better with the second wave; however, these instant changes have created some degree of pressure on the insurers. In spite of this situation, insurers have been trying their level best to cope up with the situation and ensure that their customers are well-supported.

Claims and settlements:

Covid-19 has proved to be not only fatal but also financially expensive in terms of medical treatments and other recovery measures. Insurance companies have been rigorously settling claims for one and all who have been insured against the virus, thereby increasing the outgoing cash flow. As the number of cases increased, more and more people were compelled to seek coverage benefits.

Until the mid of last month, it was observed that there were approx 11.40 lakh cases which were received by the general insurers in India. Out of which, around ~15.8% of the cases were pending cases with unsettled claims. Talking about the state of Maharashtra, around 5.35 lakh number of claims were raised out of which ~16.15% of claims remained unsettled. This clearly implies that the second wave has been really hard on the insurers owing to the excessive increase in the number of claims.

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Flexible terms and conditions:

Insurers have been tirelessly working to quickly come up with coverage plans that would make the most sense for people who are seeking immunity. This enforced the insurance companies to quickly incorporate coverage plans with flexible terms and conditions. Low premiums and basic eligibility criteria have been a key base for the Covid-19 protection plans as it was the need of the hour. This has created increased penetration but at the same time additional pressure on the insurers.

Addressing overwhelming queries:

Considering the fact that the second wave has been more threatening and difficult to handle, there has been an overwhelming flow of queries from the customers for different issues pertaining to the plans, claims, renewals etc. Although the insurance companies had to face similar issues during the first wave, there has been considerable increase due to the spiking cases during the second wave.

As the second wave progresses, insurance companies will need to focus on settling claims, make efforts to increase sales for policies, and fight a monetary pressure that might continue to grow exponentially if not looked upon.

Views expressed in this article are the personal opinion of Rakesh Goyal, Director, Probus Insurance.

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