Just 3 months after the coronavirus was officially declared a pandemic in India, the IRDAI, in June 2020, announced the release of 2 Covid-specific insurance product mandates. These addressed basic health insurance needs of the public but allowed insurers to fix premium rates. The mandate to general and health insurers was to offer 2 standard COVID health policies from the 10th of July 2020 onwards. These were aptly named Corona Kavach and Corona Rakshak. The policies are issued for a short tenure of 3.5, 6.5 and 9.5 months, which helps to address a specific risk period for an affordable premium.
Corona Kavach – Corona Kavach is a health insurance policy designed to cover hospitalization and medical expenses incurred during the treatment of Covid-19. Claims will require that covid testing is done only by authorized diagnostic centers. This is a standard indemnity-based single premium health insurance policy.
Corona Rakshak – Corona Rakshak provides 100% of the sum insured if the person affected by coronavirus requires hospitalization for 72 hours or more. This is a standard benefit-based single premium health insurance policy. Again, the covid testing needs to be conducted by an authorized testing center only.
Market Reaction to standard Covid Insurance Policies
- Initially, the response of customers as well as the insurers towards the standard covid health insurance policies was positive. Between June and July, sales of Corona Kavach increased by 15%.
- The market for Corona Kavach policies grew from 15 lakh to 1.1 crores between July and August. Growth in sales of Covid-specific policies was driven by rising Covid-19 cases, with continuous uncertainty and a surge in related medical expenses.
- Till September 2020, 2.3 million Covid-specific policies were issued, covering 11 million lives, with a sum insured of close to Rs 13 trillion. These standard policies recorded the highest ever sales for a health insurance product.
- During the April-November period of the financial year 2020-21, health insurers saw 44.25 percent growth, with the industry growing over 30 percent.
- Covid insurance policies had a high adoption rate among customers who were new to insurance i.e., customers who were not covered by any existing health policies.
- Post-November, the sales of Covid specific health policies started decreasing because of decreased Covid-19 cases resulting in reduced fear of the disease.
- Customers started showing an inclination towards regular health insurance policies. They realized that Covid-19 could be cured at home, and they need not necessarily be admitted to a hospital for treatment.
- The sales of the Covid specific health insurance policies haven’t seen considerable growth even after the surge in Covid-19 cases during the second wave; the reasons include –
- Insurers’ reluctance to renew or issue new standard covid health insurance policies. Insurers say they have paid more in settlements and claims than they had earned via premiums from policyholders. Till April, insurers have received Rs. 580 crore in premium and they have paid Rs. 570 crore in claims and settlements.
- Inclusion of treatment of covid-19 in other standard as well as regular health insurance policies.
The last few quarters have seen a record increase in covid-specific insurance policy sales. Customers are clearly leaning towards sachetized insurance products. A few hurdles and slow-sales months notwithstanding, the sachetization, or breaking down of larger customizable insurance products into smaller pre-underwritten versions, is a concept that has become popular. The trend seems definitely here to stay. The inherent benefits customers find with newly packaged micro-insurance products is undeniable. Customers prefer specific areas of protection that seem more relevant for their specific risks.
Can you think of sachet insurance policies that you would like to see in the market?
Do you think standard insurance policies have helped the insurance market? Would we see more sachetized products from the insurers? Do you think there would be a surge in the sales of Covid specific insurance policies during a possible third wave of Covid-19?