2021 review: How health and term insurance buying changed completely due to COVID-19

Representative image: Reuters

When the COVID-19 pandemic hit Indian shores in March 2020, general and health insurance companies barely felt any impact in the initial days, as only government-owned healthcare facilities were involved mostly.

Claims picked up pace once private hospitals were allowed to treat COVID-19 patients. Rising hospitalisation cases prompted Indians to realise the need for adequate insurance protection – health as well as life.  Then came the devastating second wave in March 2021, which underlined the importance of protection covers like never before.

And this, say industry-watchers, is a trend that is here to stay. A look at other aspects of insurance that have, perhaps, changed forever.

Also read: Buying a Rs 1-crore health policy? A base cover along with a super top-up works out cheaper

Insurance awareness on the rise

The good news is that COVID-19 has made people realise the importance of insurance. “Health insurance no longer needs to be hard-sold. The pandemic has exposed the vulnerabilities of families in the wake of insufficient or no health insurance coverage, with multiple family members getting admitted at the same time,” says Nikhil Apte, Chief Product Officer, Health Insurance, Royal Sundaram.

While various state governments and local bodies imposed a cap on COVID-19 treatment costs, bills shot through the roof in some complicated cases. “In India, the average (non-COVID) hospital stay is around 3-5 days. However, during the pandemic, several people experienced 7-10 days of hospitalisation. In a normal situation, it doesn’t happen that you start with a mild fever and end up going for a ‘Plasma therapy’ or ventilator support, but we saw all of this with COVID,” he adds.

Not surprisingly, therefore, buying adequate health insurance figured prominently on Indians’ priority list. “It doesn’t matter now whether you are old or young, healthy or unhealthy; everyone needs health insurance. This trend will definitely continue,” says Apte.

They are taking this route even if they are already covered under their employers’ group policies. Job losses during the initial months of the pandemic triggered this trend.  “We have observed that people in high income brackets working at senior positions were simply relying on their company group policy. However, during COVID-19, they realised that, after retirement, they needed a separate health policy with higher sum insured, especially Rs 10 lakh and above. I think this will be a permanent change,” says Apte.

Larger health insurance covers in demand

Is a health cover of Rs 5 lakh enough to protect you and your family against rising healthcare costs? COVID-19 indicated otherwise. If your family’s total cover amount is less than Rs 10 lakh, you could have a problem on hands given that hospitalisation of many family members happened at the same time as was evident during the second wave.

“People became aware of the extent to which hospital bills can rise, and correspondingly large out-of-pocket expenses due to the inadequate sum insured or coverage. You no longer need to convince someone that they need larger health insurance cover than Rs 5 lakh. Or, that you need to factor high severity and low probability risks such as pandemic and healthcare inflation to zero-in on the sum insured and expenses covered,” says Mahavir Chopra, Founder, Beshak.org, an insurance research platform for consumers. He feels an increasing number of people are buying health covers of over Rs 20 lakh.

Policyholders look beyond plain-vanilla health policies

Soon after private hospitals were allowed to treat COVID-19 patients, disputes arose between insurance companies and hospitals over fair pricing of treatment procedures. Insurance companies were reluctant to pay for PPE kits and sanitisation costs in full, which hospitals argued were indispensable to COVID-19 treatment. It’s the policyholders who were left in a lurch due to the disputes and ended up shelling money from their pocket.

This has led them to invest more time and effort in choosing a suitable product. “The expenditure on consumables such as PPE kits, gloves and masks during hospitalisation or at-home treatment on medical advice was high during the pandemic. This has triggered a demand from insurance-seekers for “all consumables to be covered” along with domiciliary hospitalisation coverages,” says Srinath Mukherji, Co-Founder, SANA Insurance Brokers.

The focus on telemedicine and home treatment procedures, which were necessitated by the pandemic-induced lockdown are likely to prompt health insurance companies towards introducing or expanding outpatient department (OPD) coverage for policyholders.

Also read: Covid 19 hospital bills: Your health insurance policy will not pay these charges

COVID-19 deaths prompt purchase of term covers

As many saw their close relatives and friends succumbing to the deadly virus, the need to financially secure their own families in during such eventualities took root during the pandemic. And, this change seems irreversible. “The second COVID-19 wave in India did not spare anyone – the young, the aged, healthy or otherwise. As a result, awareness around adequate life insurance cover increased,” says Sunil Sharma, Chief Risk Officer, Kotak Mahindra Life Insurance.

Also read: Term insurance premiums are set to rise from December: Here’s what you can do

Era of low term insurance premiums is now over

If individuals turned more cautious and looked at buying term covers to reduce risks, life insurance companies, too, adopted the same approach. The industry has seen several rounds of premium rate hikes, starting March 2020. The latest round of hikes is set to see term rates go up by 25-45 percent. “Life insurers have adopted stringent due diligence processes now. Loss ratios have been significant and reinsurers have been raising premiums. The rates in India were low due to the competition in this space in the last 10 years, but now there will be a correction,” points out Sharma. Underwriting processes – where insurers assess your risk and charge premiums accordingly – are now stricter. Undergraduates and those who earn less than Rs 5-7 lakh a year might find it difficult to obtain term insurance policies at reasonable rates.