The D-day for the launch of standard COVID-19 health insurance policies, Corona Kavach, is here. The Insurance Regulatory and Development Authority of India (IRDAI) has directed all general and health insurers, to mandatorily offer this standard, reimbursement-based, COVID-19 health policies with uniform features and clauses from July 10.
While the policy wordings for standard policies will be common across insurers, pricing and underwriting of covers are at insurers’ discretion. So, when it comes to selecting a standard product, these two will essentially be the deciding parameters for prospective policyholders. Let us understand how these aspects will be factored into the product design and what this means for you.
Corona Kavach likely to be cheaper than regular policies
Premiums of the standard COVID-19 reimbursement policy could be lower than those of regular health covers, say insurers. “The purpose of creating Corona Kavach is to make premiums affordable and attractive for the common man who does not have regular policies. We are designing our product in such a fashion that it is less expensive than a regular plan,” says Dr S Prakash, Managing Director, Star Health and Allied Insurance.
This, despite the standard COVID product making it mandatory to cover co-morbidities – pre-existing ailments – if they necessitate treatment alongside COVID-19. “Co-morbidities can increase the treatment costs by a certain margin, but will not change the whole paradigm. It will not involve, say, chemotherapy or kidney transplant, which can be expensive procedures. Besides, these are limited-period, single-risk policies,” says Sanjay Datta, Head, Underwriting, Claims and Reinsurance, ICICI Lombard.
In fact, it could even be cheaper than the Arogya Sanjeevani, the standard, basic health policy that all general insurers have started offering from April. “From a customer standpoint, the Corona Kavach covers one disease, while regular health policies and Aarogya Sanjeevani cover many. So, at present, premiums will be lower than Arogya Sanjeevani’s,” says Bhabatosh Mishra, Director, Claims, Underwriting and Product, Max Bupa.
However, given that the COVID-19 outbreak has not neared its peak in India, things could change in the coming days. “Current premiums have been arrived at based on the data available. However, if it does not hold good and is unsustainable given the highly fluid COVID situation, we will be compelled to go back to the regulator,” he adds.
While pricing is work-in-progress, industry officials’ estimates suggest that premiums could start from around Rs 2,000 for 40-year-olds buying Rs 5-lakh covers, but those with pre-existing conditions could be charged higher premiums. “Overall, the premiums could be around 1-2 per cent of the sum insured. Underwriters are concerned about policy pricing. The last one month has seen an exponential rise in cases and some countries are seeing second and third waves. The unpredictability is a cause of concern for them,” says Gurpal Dhingra, Director, Prudent Insurance Brokers.
Some insurers maintain that pricing the product right is proving to be a huge challenge, primarily due to a short 15-day waiting period and coverage of co-morbidities. “On the one hand, this is a disease-specific cover, but on the other hand, it covers co-morbidities along with COVID-19 treatment, but without any pre-existing diseases waiting period, making it akin to a full-blown cover,” points out Nikhil Apte, Chief Product Officer, Royal Sundaram. For instance, in case of a cancer cover, pay-out is restricted to cancer-related treatment, which is why the premiums are comparatively lower.
Tighter scrutiny at the time of issuing policies
Although the premiums of Corona Kavach policies are expected to be low, expect tighter scrutiny from insurance companies while issuing these policies. This is primarily because co-morbidities are included in their coverage. “If a patient, who has, say, kidney stone, contracts COVID-19 and is hospitalised, the kidney stone treatment, too, might have to be paid for under Corona Kavach, if deemed necessary. This will push up the overall cost of treatment,” adds Apte. Moreover, the claims become payable 15 days after policy issuance, whereas the waiting period is four years for pre-existing illnesses under Aarogya Sanjeevani and most regular policies. Similarly, certain procedures such as hernia or cataract are eligible for claim after one to two years of policy issuance.
“Mandatory coverage of co-morbidities, a short waiting period and shorter tenure pose underwriting risks. Our underwriting, therefore, will be tighter while issuing COVID-19 policies,” says Apte.
Most insurers say they will rely more on self-declaration rather than medical tests. “We will not insist on pre-issuance medical check-ups, but there will be some additional questions as part of self-declaration. For instance, whether they are already COVID positive or are living in the same house as a COVID positive person or have attended gatherings were such cases were detected,” explains Mishra. Pre-issuance check-ups will also be difficult given the risk of contracting the infection through the laboratory or even home visits to collect samples.Some believe that since underwriting is at insurers’ discretion, those with co-morbidities and the elderly could get left out. “Insurers could choose the ones with the lowest risk, which is a matter of concern. This is the time when all stakeholders – government, regulator, insurers and hospitals – need to work out a consensus that is practical and sustainable for everyone,” says Dhingra.