The world changed drastically with the onset of coronavirus at the beginning of 2020. A disease, which originated in China, soon turned into a pandemic making people across the world kneel to its whims and fancies. It challenged globalization, banned leisure travel and forced people to confine to their homes to stay safe. Just like other countries, India too witnessed a harsh nationwide lockdown that, ultimately, impacted the economy. With an adverse effect on the country’s GDP, an influence on the insurance industry had to be coming.

The GDP of a country is one way of measuring the insurance penetration in the country. With several industries shut for months, the revenues have fallen drastically impacting general insurance renewals. For example, vehicles went off the road and travel was banned resulting in a decline in motor insurance and travel insurance renewals. While most of the insurance industry has seen a considerable decline in its revenue, health insurance has been thriving within this pandemic.

Health Insurance Industry during COVID-19 Pandemic

COVID-19 is a new disease and therefore, the knowledge about its transmission and prevention is being discovered with each passing day. Its treatment and long-term effect are yet to be ascertained, which is one of the prime reasons why there has been a significant rise in health insurance queries recently. Uncertainty creates fear and the fear of contracting the coronavirus has led to people ensuring financial health security by buying health insurance.

In India, there has been a spurt of 30-40% sale of health insurance online since the advent of the coronavirus disease. The pandemic has increased the awareness around health insurance pan India which has resulted in more people buying a health cover. Millions of people have been diagnosed with the coronavirus disease and the government is struggling to keep its spread under check. Moreover, reports of hospitals charging exorbitant bills to COVID patients float in social media every other day making health insurance the only saving grace.

The ever-growing COVID-19 cases and non-availability of a vaccine have definitely led to panic buying of health insurance policies. But according to Dr Mohit Sharma from Institute of Human Behaviour and Allied Sciences (IHBAS), anxiety and depression is a normal reaction by people when faced with an unusual situation. Well! That can’t be denied. After all, it is not every day that a person wakes up to a pandemic and has to stay home and maintain social distancing for survival. Besides, a health cover should be a part of every household and if the pandemic makes a person buy one for his family, it is not entirely bad.

Growth of Health Insurance During COVID-19

As per the General Insurance Council, the health insurance premium segment amounted to 32.7 per cent of the total general insurance market in July 2020. Thus, the health insurance segment took over the motor segment (30.3 per cent) to emerge as the largest premium segment under general insurance. Moreover, the gross direct premium income also grew by 10.44 per cent to Rs 18,415.5 crore for health insurance providers between April and July 2020.

There has also been a significant increase in the sum insured as people are majorly opting for a health cover between Rs 25 lakh to Rs 1 crore. Before the pandemic, people were content with a health policy of Rs 5 lakh but looking at how high the treatment cost of COVID-19 can get, most of them are now choosing to opt for a sum insured of at least Rs 10 lakh. Besides, health insurance policy with a higher sum insured has also become more affordable today.

Going by the predictions, the health insurance industry is expected to keep growing as long as the pandemic continues to create a need for a health cover for everyone.

Making Way for Digitization

The coronavirus pandemic may have created havoc across the country but it did pave way for massive digitization in the health insurance industry. Although health insurance plans were available online even before the pandemic, the digital distribution system has become more prominent now. Health insurance providers, such as Religare, Max Bupa and HDFC ERGO Health Insurance, have managed to increase their telemedical services by joining hands with online insurance brokers.

Taking cognizance of overburdened healthcare infrastructure due to the pandemic, health insurers and the distributors have managed to eliminate the need for a physical medical check-up at hospitals and health clinics before issuing a policy. They have formed a team of physicians and specialists to conduct medical check-ups and health assessments over phone calls.

For instance, certain insurance brokers allow people to buy health insurance online with a sum insured of up to Rs 1 crore without the need for a physical medical check-up. Instead, it conducts medical check-up of buyers over a phone call. Similarly, Max Bupa Health Insurance allows its team of doctors to conduct medical check-up over video calls and makes online policy issuance process more customer-friendly. The claim process has also been digitized with the insurer offering claim approvals online.

Some health insurance companies are also going that extra mile to make the policy purchase process effortless for buyers. Their customer executive team ensures that the customer clearly understands the features, terms & conditions of a health plan before buying. For example, Star Health Insurance has inculcated a 100 per cent digital on-boarding process to ensure that the buyer understands the terms and benefits of the health plan before making the purchase.

COVID-19 Specific Health Insurance Plans

In a bid to support the public with COVID-19 treatment expenses, the Insurance Regulatory and Development Authority of India (IRDAI) directed all health insurance providers in India to offer two standard indemnity-based COVID-19 policies – Corona Kavach and Corona Rakshak policy. Both the policies hit the market in July 2020 offering lump sum benefit to those diagnosed with COVID-19.

The Corona Kavach and Corona Rakshak policies have largely garnered a good response since its introduction. As per recent reports, a popular health insurer has stated that they are selling about 200-300 Corona Kavach policies per day. However, the buyers of these policies mostly comprise of people who are old, have co-morbidity or cannot afford a comprehensive health insurance policy. That explains why the sale of comprehensive health insurance has increased up to three times by July 2020. Moreover, there is always the option of health insurance portability for people who want to shift to a comprehensive policy.

Challenges Faced by Health Insurers

The pandemic has not entirely been a bed full of roses for the health insurance market. Several challenges and uncertainties loom over the industry owing to the pandemic. To begin with, the claim costs arising out of COVID-19 are higher. The IRDAI has directed insurers to accept coronavirus treatment claims under existing comprehensive policies. This may act as an additional burden for the insurers as the past premiums did not account for COVID-19 treatment. Secondly, the COVID-19 treatment can go on for a long period of time for people with co-morbidities and thus, may lead to non-COVID-19 claims even after the pandemic.

There is a high degree of disparity regarding policy coverage for claims arising out of coronavirus. Hospitals need to keep a COVID-19 patient in insolation and use items, such as PPE kits, disinfectants, gloves, etc., as part of the treatment protocol. These items are not usually covered under health insurance and thus, it adds to the treatment cost along with the cost of the isolation ward.

Also, the COVID-19 specific policies are short-term health plans with a maximum tenure of 9.5 months. As a result, the sustainability of buyers after policy expiry will pose a major challenge. These policies do enable more number of people to get covered under a health policy today but do not promote long-term insurance penetration. Health insurance needs to be renewed every year to ensure continued financial health security but the COVID-19 specific policies do not encourage buying health insurance in the long run.

To top it all, the IRDAI also directed insurers to extend the policy renewal grace period to up to 30 days owning to the disruption of business across industries. This may lead to problems pertaining to immediate liquidity for the insurance companies.

Fortunately, the health insurance industry is working towards standardizing the billing pattern for the treatment of coronavirus. The billing may be uniform as per bed capacities or the location and may include PPE kits as part of the inclusions.

In a Nutshell

India is currently the second worst-affected country by the COVID-19 pandemic. However, it catalysed health insurance as the largest premium segment under general insurance. The COVID-19 specific has definitely come as a breather for people who can’t afford comprehensive policies. But the challenges faced by the health insurers also need to be tackled so that they function smoothly and can retain customers even after the pandemic is over. It all depends on how long the pandemic lasts and how quickly the industry clears the challenges thrown at it.