Moneycontrol PRO
Upcoming Event:Join us for the exciting discussion with Danone on role of nutrition, protein in working professionals’ quality of life on July 31, 3pm.

Top life insurers raise provisions as COVID-19 claims pinch hard

ICICI Prudential Life has set aside Rs 498 crore for COVID-19 claims while HDFC Life is setting aside excess mortality reserve of Rs 700 crore. Claims had increased manifold in the June quarter

July 21, 2021 / 11:47 AM IST
  • bselive
  • nselive
Todays L/H

The second wave of COVID-19 and the looming threat of the third wave has severely hit large private life insurers, prompting them to shore up their provisions.

The two largest private insurers ICICI Prudential Life Insurance and HDFC Life Insurance have set aside additional provisions for COVID-19 claims.

HDFC Life Insurance has set aside an excess mortality reserve of Rs 700 crore created at the balance sheet for potential adverse mortality. This reserve is over and above the policy level liabilities calculated based on the applicable IRDAI regulations. This was in addition of Rs 165 crore of the provisions.

The company's solvency position remained at 203 percent in Q1 against the statutory minimum requirement of 150 percent.

In a report, Motilal Oswal Financial Services said quoting the HDFC Life management explained that peak claims during the second Covid wave were about 3-4 times of peak claim volumes in the first wave.


COVID-19 Vaccine

Frequently Asked Questions

View more
How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

View more

"The claims are still elevated compared to pre-Covid levels but are declining from as high as ~300 claims a day in Q1FY22 to now ~200 claims a day as the spread of the pandemic tapers," said the Motilal Oswal report on HDFC Life.

ICICI Prudential Life Insurance posted a consolidated net loss of Rs 185.29 crore for the June quarter (Q1) on COVID-19 claims and provisions. The insurer had posted consolidated net profit of Rs 286.86 crore in the year-ago period.

Due to COVID-19 claims, the insurer is carrying Rs 498.29 crore as provisions for such claims at the end of the June quarter. In its investor presentation, the insurer said that it had Rs 1,119 crore of COVID-19 claims in Q1. Net of reinsurance the claims were Rs 500 crore.

It added in its investor presentation that the Q1FY22 net claims plus provisions held at June 2021 covers five times the net claims in FY21.

Moneycontrol had reported earlier how there is a mismatch between actual deaths and insurance claims. As per the RBI's financial stability report life insurance received 22,205 COVID-19 death claims worth Rs 1,644 crore during FY21.

Fears of third wave?

Motilal Oswal said in its report on HDFC Life that the rise in additional reserves is based on current expectation of extra claims to be received in future.

"HDFC Life Insurance saw higher COVID-19 claims and settled gross claims of Rs 1,600 crore (over 70,000) as claims during the second COVID wave have been 3–4x the peak claims seen during the first wave," the report said.

On ICICI Prudential Life Insurance, the report said that the insurer settled ~ Rs 1,120 crore in total claims on account of the pandemic in Q1FY22 (a 3.2x increase over FY21). The report added that it made provisions of ~ Rs 170 crore during Q1FY22.

As of 8 am on July 21, India recorded 42,015 new COVID-19 cases and 3,998 deaths in the previous 24 hours. The total cases stood at 3.12 crore and total deaths stood at 4.18 lakh.

Follow Moneycontrol’s full coverage of the coronavirus pandemic here
M Saraswathy is a business journalist with 10 years of reporting experience. Based in Mumbai, she covers consumer durables, insurance, education and human resources beat for Moneycontrol.
first published: Jul 21, 2021 11:47 am

stay updated

Get Daily News on your Browser
ISO 27001 - BSI Assurance Mark