Coronavirus outbreak: Insurers receive just 1,000 death claims despite rising COVID-19 toll

While Coronavirus has claimed 50,921 lives in India so far, insurance companies report that they have received only 1,000 death claims so far and settled 600 of them. This settlement figure accounts for only around 1.5 percent of the total casualty figures.

In fact, close to five months after the COVID-19 outbreak, only 66,700 claims have been settled under various insurance policies. Of this, 66,100 pertain to COVID-19-related health insurance claims.

Though general insurers have received 1.03 lakh COVID-19 health claims worth Rs 1,560 crore in the last five months, industry sources say the amount of claims are similar to the health claims received in the normal course of business.

Only half of them have been settled and the rest are pending documentation and approval.

Insurers attribute the low claim ratio to the poor insurance coverage in the country. However, officials said that as standard COVID-19 policies are now available, there is a likelihood of claims rising in the coming days.

As of 9:30 am on August 17, India had 2.64 million COVID-19-positive cases and 50,921 deaths. Of the total cases, 6.76 lakh are in active status.

25 percent claims not valid

Compared to 6,500 COVID-19 health claims in June, 1 lakh claims were filed in August. However, insurers said that about 25 percent of them are not admissible as they don’t involve hospitalisation or fit into other policy terms.

“The average claim size for COVID-19-linked treatment, including hospitalisation, is around Rs 1.4 lakh. Several consumables, including PPE kits, are not payable under traditional medical covers. Less than 35 percent of India’s population has health insurance coverage, and, hence, the claims are low,” said the head of claims at a mid-sized private general insurer.

In FY19, as per IRDAI statistics, general insurers incurred Rs 33,676 crore in health insurance claims -- a monthly claims expense of roughly Rs 2,806 crore for the industry.

Lower death claims

Of the 1,000 death claims filed so far, claims worth Rs 50 crore have been settled.

The country’s largest insurer, Life Insurance Corporation, has settled claims worth Rs 21.15 crore as of August 15. An LIC spokesperson told Moneycontrol that this amount breaks up into 293 claims under 693 policies.

In the life insurance sector, sources said that the average claim amount stands at Rs 5.5 lakh for death claims under term plans.

“We have less than 3 percent insurance penetration in life insurance. So low number of death claims does not come as a surprise,” said the head of distribution at a bank-led private insurer.

As per Insurance Regulatory and Development Authority of India (IRDAI) statistics, there were 333.3 million in-force life insurance policies as of FY19. This means that only 25.7 percent of the country’s population was covered by life insurance policies.

A Swiss Re sigma report showed that India’s insurance penetration (insurance premium as a percentage of GDP) in FY20 was 3.76 percent against the global average of 7.23 percent.

The global reinsurer had earlier said that there is a big gap in the insurance coverage (pure protection) in Indian households.

The mortality protection gap report for Asia-Pacific by Swiss Re had said that the gap in India was $8,555 billion in 2014. This means that average Indian families were not adequately covered for death compared to the actual annual earnings of the person covered.