Covid19 Linked Claims

Covid19 linked life insurance claims remain an overhang: Report

  • Covid19 Linked Claims Most insurers report a higher experience in FY21.
  • Have made provisions to absorb potential Covid19 Linked claims that may arise in the wake of a more devastating COVID 2.0.

Covid19 Linked Claims

The surge in covid-19 infections and fatality rates have raised concerns on mortality claims the industry may witness in the coming months.

Most Life insurance reported a higher Covid19 Linked Claims experience in FY21.

Have made provisions to absorb potential claims that may arise in the wake of a more devastating covid-19 2.0.

The report further stated that against

The total covid-19 relate deaths of around 163000 reported in FY21, the fatality count has already increase to around 152000 in FY22 YTD.

The claim experience is thus likely to stay adverse over the next couple of quarters.

All the more due to delays in the reporting of Covid19 Linked Claims.

The stringent actions announced by several state governments have helped lower the infection count.

The pickup in vaccination rates may prevent another wave of this magnitude.

Despite this, claims in 1HFY22 may easily surpass the total Covid-19 Linked Claims seen in FY21.

As per media articles, life insurers have settle claims worth 19.86b toward 25,500 covid-19 related death claims.

This corresponds to 15.7% of the total covid-19 relate fatalities in FY21. Among the key companies, we note that HDFCLIFE, IPRU.

SBILIFE settled 2300, 2500, and around 5000 death claims, respectively, in FY21.

Net of reinsurance, these companies have thus incurred cost of 1.5b, 2.6b, and 3.2b, respectively.

Covid19 Linked Claims

Insurers may need to shore up covid-19 provisions

All of the three biggest life insurers have made provisions toward covid-19 claims.

While HDFC Life/SBI Life has made 1.65b/ 1.83b worth of provisions, IPRU has provided for 3.3b worth of provisions.

Given the sharp rise in fatality rates, the insurers would need to shore up their provisioning buffers, which would impact their profitability/EV.

This does not, as such, pose any material risk to the balance sheet/solvency ratios.

Group term products may see further price revisions

Most insurers took price hikes in early FY21 after an adverse claim experience resulted in reinsurer hiking rates.

Given that individual term products are of longer tenure (20–30 years).

The adverse claim experience due to an event does not necessitate an immediate price change.

However, Group term products, which are annually renewable, may see price revisions on higher demand for such products in recent times.

Long-term Savings products also are relatively more risk-tolerant as the lower sum assured.

Longer product duration enables insurers to absorb volatility, as per the report.

Covid19 Linked Claims

Claims settlement amid pandemic

While onboarding a new customer digitally is still simple, settling the claim entirely online may not be feasible.

Insurers have done their best.

They have fine-tuned digital tools to streamline the online process for quick settlement.

However, some external factors are creating issues.

For example, in some cases claimants are unable to receive death certificate on time, the submission of which is imperative for claims settlement.

Hospitals are taking time in releasing the death certificates.

Other treatment records, but the bigger challenge is claimants hesitating to venture out and collect these documents.

If it is not convenient to file the death claim now then you can delay it for some time.

You should file it within two years of the date of the death beyond which you may be asked to explain.

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