Pandemic Premium: Rather than raising premiums to create a buffer for Covid-19 claims, health insurers should better underwriting practices

As many policyholders have not renewed their short-term covers, they are been left uninsured as the second wave of the pandemic has hit the country.

Health insurance companies seem to be gearing up to once again raise premiums as they expect a steep rise in Covid-19-related claims. Insurers increased the premium rates last year after meeting certain regulatory norms that were mandated. Any steep increase in premiums now will discourage people from purchasing a new policy or renew existing ones. In fact, sales of health insurance policies, including those for short-term Covid specific covers—Corona Kavach and Corona Rakshak—which were on the rise after the first wave of the pandemic last year, started falling with decline in the number of cases. As many policyholders have not renewed their short-term covers, they are been left uninsured as the second wave of the pandemic has hit the country.

As per the General Insurance Council, Covid-related claims worth Rs 14,680 crore have been made as of March and, of this, Rs 7,900 crore, or 54%, has been settled. To be sure, premiums collected by all health insurance companies rose 13%, to Rs 58,584 crore in FY21. Most notably, retail health premium increased 28% year-on-year as compared to 12% in FY20 because of a strong momentum in the sales of short-term Covid-19 policies and high risk aversion due to the pandemic. However, rising Covid-related claims shouldn’t push up premiums. Instead, health insurers should factor in medical inflation to increase premium once every 3-4 years, as has been the norm till now, and adopt better underwriting practices to keep their operations sustainable. An increase in coverage of people with comprehensive health insurance policies will not only reduce the burden of out-of-pocket expenses of policyholders but will also generate higher volumes for the industry.