Got the COVID-19 jab? Health insurers may offer discounts on premiums

Applications of co-morbid persons who are vaccinated or have developed anti-bodies post-recovery, are viewed more favourably

March 23, 2021 / 09:30 AM IST

Coronavirus vaccines will not just protect us from severe infections in future. They are also likely to bring us added goodies from insurance companies.

This is somewhat contrary to last year’s move when many insurance companies set hurdles for those had got COVID-19, had a history or air-travel or even health workers and those who had been quarantined.

Insurers – life as well as general – are in the process of ascertaining whether favourable treatment can be given to customers who are vaccinated against COVID-19. While some believe COVID-19 will alter the evaluation process before issuing policies, others feel it is too early to draw conclusions.

Waiting period waiver

“At present, there are waiting periods for policyholders who contract COVID-19. This waiting period could be waived if the insurance buyer is vaccinated,” says RM Vishakha, MD and CEO, IndiaFirst Life Insurance. Health insurers introduced waiting periods as COVID-19 led to higher claims this financial year, and they want to keep their loss ratios under control. The waiting periods - before issuing the policy - range from three months for COVID-recovered insurance-buyers who did not need hospitalisation and six months for applicants who had to be hospitalised due to COVID-19. “COVID-19 is one of the leading causes of claims this year. So, once vaccinations pick up pace, at least COVID claims will reduce – that is a safe assumption to make,” she adds.

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COVID-19 Vaccine

Frequently Asked Questions

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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.

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Life and health insurers have been exercising extreme caution while issuing policies to individuals who have recovered from COVID-19, the probable long-term effects of Covid-19 being the key reason.

Lower premiums for health insurance policies

Royal Sundaram’s Chief Product Officer (Health) Nikhil Apte, too, believes that COVID-19 will heavily influence underwriting in the days to come. Underwriting is the risk assessment process that insurers carry out, to decide whether the policy can be issued to you or not, and at what price.

For instance, if an insurance buyer with co-morbidities is not vaccinated, the risk is higher for insurance companies as chances of hospitalisation and treatment costs are likely to be higher. “But we could look at someone with co-morbidities who is vaccinated or has developed anti-bodies post-recovery, more favourably. For them, the premium loading could be lower,” he says. In other words, the incremental charge, which insurance companies levy over the base premium (the standard rate applicable to healthy, young individuals) to cover the risks of pre-existing diseases, could be lower.

He does not foresee long-term effects of COVID-19 casting a shadow on evaluation of applications from COVID-recovered patients. “Even if the recovered patients complain of lingering effects, those are unlikely to be severe enough to warrant hospitalisation. Generally, such health concerns can be managed through lung exercises, nutrition and so on. So, such cases do not pose continuous risk for us – these are more of outlier risks,” explains Apte. People are now more conscious about health and hygiene, which is a long-term positive, he adds.

Rewards, discounts in the offing for the vaccinated

With healthcare inflation likely to remain in the 19-20 percent zone even in financial year 2021-22, insurers could come out with mechanisms to underwrite more healthy lives and limit their claim outgo. “Whether you are vaccinated or not could be the first question that insurers are likely to pose. Depending on this, even the price points will be affected. In fact, some have already started work on this front,” says Aatur Thakkar, Director, Alliance Insurance Brokers.

Currently, several insurers already offer concessions or reward points to policyholders who demonstrate improvement in their health parameters or carry out defined fitness activities.  

These typically take the shape of vouchers that could be redeemed to meet, say, diagnostic test expenses or cash equivalents that can be used to fund renewal premiums. “Even now, some insurers offer health discounts at the end of the policy period. Then, there are no-claim bonuses that enhance the sum insured at no extra premium. We see something similar being designed for those who are vaccinated against COVID-19,” adds Thakkar.

However, not all insurers foresee COVID-19 making a significant, long-term impact on underwriting. “Whether you took the jab or not will not be a criterion. Individual insurers will take calls on issuing policies to COVID-recovered patients with lingering symptoms and, in general, there could be a 15-day waiting period post policy issuance. But, it is too early to say whether underwriting approaches will change due to vaccinations,” says a senior actuary at a private general insurance company.
Preeti Kulkarni is a financial journalist with over 13 years of experience. Based in Mumbai, she covers the personal finance beat for Moneycontrol. She focusses primarily on insurance, banking, taxation and financial planning
first published: Mar 23, 2021 09:21 am

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