With the unfortunate Covid 19 situation, each and every sector has a big impact on their daytoday life. Perhaps one of the biggest effects of this situation is on the insurance industry and the financial services industry.

In many situations, insurers have already commenced taking the suitable actions for protecting their businesses, which have left many clients in the lurch in this unfortunate time. As well as, the reputation of insurers is obtaining a further battering as consumers and businesses come to terms with the fact that most insurance policies do not cover pandemics.

With a threatening global economy and an increasing number of insolvencies, the insurance industry and their investments are coming under pressure like never before.

As communities around the world continue to grapple with the covid -19, much remains uncertain for businesses, but the impact on the property/casualty insurance industry is becoming more evident. Claims activity in multiple industry sectors makes clear that companies of all sizes are experiencing substantial losses due to the unprecedented disruption of normal business operations. Many questions around business interruption insurance persist and will be critical in assessing the toll of the pandemic. These are far from the only policies implicated, however. Companies have begun filing a growing number of COVID-19-related claims for losses in directors and officers (D&O) liability, workers compensation, standalone cyber, professional liability, employment practices liability (EPL), and trade credit.

Impact on motor insurance industry

As per the report, the entire automobile sector was already facing a dip in 2019-2020. New automobile purchases constitute a major portion of the premiums, and hence the lockdown and virtual stoppage of business may aggravate the situation. Challenges faced by the motor insurance industry would include:

Lack of purchase of new vehicles is one of the biggest challenges. Normally, that would be compensated for by increasing the coverage net of existing vehicles, a vast majority of which fall out of the insurance net by the third and fourth years. But that would be difficult to do given the lack of distribution feet on the street

Claim surveying will be impacted by the lockdown as surveyors will not be able to go out to survey vehicular damage, either at all or on time. Since surveying above a certain projected claim value (Rs 50,000 earlier, which has now been raised to Rs 75,000) is to be done by independent surveyors, their unavailability during the lockdown is going to be a problem.

Impact on health insurance industry

As per the report, in order to dispel any general misconceptions about the applicability of health insurance policies to cases of COVID-19, the IRDAI has instructed insurers to accept COVID-19 related claims under active health insurance policies. Since the risk of COVID-19 is not currently priced under active products, these claims may cause an additional burden on the books of insurers if treated outside Government hospitals.

Community transfer in the future could lead to an afflicted population across social and economic classes and result in claims running up to a few crores, as per the report.

Since the traveller base is more prosperous than the national average and therefore more likely to contract CoVID-19, the disease is expected to spread through social transmission, which will affect this segment less. Claims are likely to be therefore not significant enough to trigger pandemic covers that may have been purchased from reinsurers immediately.

The Ayushman Bharat scheme may see a greater number of claims compared to private health insurance companies due to widespread coverage. This scheme may not have factored in the cost of setting up isolation wards. Given that isolation of hospitalised patients is crucial to prevent further community spread, this cost will create an additional burden which has to be borne by the Government. Many insurers are running the scheme with a PPP arrangement with the Government and they will have to recalibrate their financials, as per the report.

Impact on the life insurance industry

As per the report, the life insurance industry normally deals with pure risk term policies, investment-linked policies, and savings policies with guaranteed/semi guaranteed long-term returns. There will be impact across the board, but the reasons will be different for each category.

However Indian insurers should consider performing targeted activities to protect community interest and build more trust in the society, PWC India stated.


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