It is too early to say if COVID-19 and vaccinations will influence underwriting and term insurance premiums in the long term, Subhrajit Mukhopadhyay, Executive Director, Edelweiss Tokio Life Insurance tells Preeti Kulkarni in an interview. Excerpts.
What has your company's COVID-19 claim experience been so far? Has it worsened in the second wave, in line with the rising case and death graphs in the country?
So far, we have seen increased death claims due to COVID-19. However, the impact is not significant on the overall claim experience of the company. We typically see a 2-3 months’ lag in claims reporting. So, the full impact of the second wave is yet to be seen. Nonetheless, we are monitoring the trends to understand the impact this wave will have on our overall claim experience.
On the demand side, we are seeing a significant increase in people wanting to buy insurance. The importance of insurance in managing risk and providing protection against financial strain resulting from unforeseen adverse events has been reinforced with this pandemic.
Have you seen a rise in death claims among younger individuals over the last one year? Has the proportion gone up during the second wave?
So far, we have not seen any noticeable change in the trend among younger individuals in the last one year. Although there are concerns over increased mortality among the young and middle-aged groups during the second wave, this is yet to get reflected in our claims experience. This is primarily due to the lag in claim reporting (time taken by the policyholders’ dependents to file claims).
COVID-19 has been an event of course-altering proportions. What are the changes that underwriting processes are likely to undergo in future?
Underwriters have been evaluating the risk profile of each individual on a case-to-case basis and they will continue to do so. We need to understand that the post-COVID-19 prognosis is not entirely clear at present. This will depend on how the pandemic will play out. Underwriting processes will continue to evolve on the basis of new data and research, which will reflect the impact of COVID-19 both in the short and long-terms.
How will vaccinated individuals be evaluated? Will underwriters view them favourably and charge lower premiums as risks are lower?
Vaccination will certainly help in reducing deaths due to COVID-19. These cases could be considered favourably, provided there are no symptoms at the time of insurance coverage. As more and more people get vaccinated, insurers will have a better understanding of how that can be factored into the overall underwriting process. However, there are several additional factors, too, that determine an individual’s risk profile and same will be accounted for while evaluating the risk profile of an individual.
Term insurance premiums saw 10-20 percent spike in April. Will we see a sharper rise in premiums post the second wave of COVID-19?
COVID-19 has resulted in an increase in the number of deaths across all business segments, including term insurance. However, it is still not clear whether this is a short-term phenomenon or will it have a long-term impact on life expectancy. The premium rates are usually revised when long-term expectation of various parameters are changed as the premium rates are guaranteed for the entire term of the product. Therefore, the impact of COVID-19 on premium rates will be known only when there are sufficient data points to analyse the impact of COVID-19 on the long-term mortality expectancy.
Could you elaborate on the reasons for significantly higher Saral Jeevan Bima plan premiums?
Saral Jeevan Bima is a basic term insurance product. Its purpose is to ensure that every individual, irrespective of his/her socio-economic background, has access to financial protection. This product has two unique aspects – one, it is simple and easy to understand for a first-time buyer and it has been made available for a larger section of society which may not have easy access to existing term plans in the industry.
The pricing of any term product is a reflection of the life expectancy of its target market. Mortality experiences vary among different segments of populations due to various reasons such as income levels, education, type of occupation and access to health facilities. As it is a newer customer category, product pricing and underwriting will evolve over time, with the availability of more data.