IRDAI data show that while motor insurance premiums saw a 15.7 percent decline, health insurance premiums grew 13 percent YoY in the April 1-August 31 period. Demand for health products because of COVID-19, and non-renewal of vehicle insurance the main reasons.
For the first time in India's insurance sector, the health business has beaten the motor vertical to become the biggest non-life industry segment, boosted by a rise in standard Coronavirus (COVID-19) plans.
On the other hand, a slump in vehicle sales has affected motor insurance.
Till now, the motor insurance segment, driven primarily by the mandatory motor third-party insurance, has always been the largest business segment in the general insurance sector. However, industry sources said that this year, COVID-19 played spoilsport.
“When it comes to third-party cover, it includes insurance for new vehicles as well as renewals. The reality is that customers are not renewing their vehicle insurance since remote working is the new normal. This has severely affected motor premiums,” said the head of sales at a bank-led general insurer.
Insurance Regulatory and Development Authority of India (IRDAI) data showed that while motor insurance premiums saw a 15.7 percent decline, health insurance premiums saw a 13 percent YoY growth in the April 1-August 31 period.
For the general insurance industry, premium collections remained muted for the period with just a 3.6 percent YoY rise to Rs 73,968.26 crore. The health insurance business contributed Rs 22,903.44 crore.
Why is health insurance gaining?
The Coronavirus outbreak and the subsequent lockdowns since March 25 have affected the movement of people. This hit vehicle sales, and subsequently, motor insurance.
On the other hand, COVID-19 cases were constantly on the rise. Several thousand individuals required hospitalisation for treatment.
Insurers said that those without a health policy rushed to buy products since the regulator clarified that every policy covering hospitalisation would also pay for COVID-19 treatment at designated centres.
According to the health ministry, there are a total of 6.07 million COVID-19 positive cases, of which 9,62,640 are active ones. There have been 95,542 deaths so far.
To deal with the specific needs of COVID-19 patients, IRDAI came out with a standard product called Corona Kavach. This plan covers hospitalisation due to COVID-19. IRDAI chairman Subhash C Khuntia had said that that 3.2 million lives have been covered. Further, a total of 2,38,160 COVID-19 health claims have been filed. Of these, 1,48,298 claims worth Rs 1,430 crore have been settled.
“Initially, there was a misconception that COVID-19 claims won’t be paid under health insurance. Later, the regulator clarified that Coronavirus treatment would be covered, and there has been an uptick in policy purchase,” said the head of underwriting at a standalone health insurer.
In the entire non-life sector, standalone health insurers (insurers who only write health business) have seen the largest gains due to COVID-19 awareness and allied policy purchase.
These insurers saw a 29 percent YoY increase in health premiums to Rs 6,096.46 crore. Star Health Insurance was the largest insurer in this segment with a growth rate of 45.45 percent YoY in the April to August period, with premiums touching Rs 3,182.26 crore.
Aditya Birla Health Insurance saw a 93 percent YoY growth in health premium to Rs 409.03 crore in this five-month period. Another factor that led to the growth in health insurance has been the availability of more products.
131 products introduced
IRDAI member non-life TL Alamelu said that there have been 131 new health products between March and August. She added that the industry had a constant number at 500 as far as health insurance is concerned, for close to two decades.
“Now after the lockdown, IRDAI has approved 131 new products. We are also at a fast-forward stage," she said.
Alamelu explained that health will continue to stay the biggest business in FY21. “In the initial months, there was a notion that COVID-19 can be treated at home and costs will not be high. However, hospital bills ballooned to several lakhs in private hospitals for patients with comorbidities and this has increased insurance demand," said the senior vice president (distribution) at a mid-sized insurer.
For a 14-day treatment of COVID-19 at a private hospital in Mumbai, the cost could be as high as Rs 12 lakh.Moneycontrol had reported earlier that COVID-19 related expenses have led to a war-of-words between hospitals and insurers.