Covid booster: Health cover now top segment in general insurance

MUMBAI: The Covid-19 pandemic has provided a booster shot to the health insurance business in the country. With 130 new products launched in four months, the segment has overtaken motor to become the largest business for non-life companies. According to the insurance regulator, the dominance of health will only increase by the end of the year. However, the protection gap (between ailments and claims) in smaller cities remains a concern.

"The insurance industry has come up with 500 health insurance products in the last 20 years. Since March 2020, we have approved 130 new products. Health is already bigger than motor insurance and at the current rate will increase the gap by leaps and bounds by the end of the year," said T L Alamelu, member, Insurance Regulatory and Development Authority of India (IRDAI) at a FICCI health online insurance conference on Wednesday.

Motor insurance, which accounted for 38% of industry premiums, has fallen to 30% while health which was 30% last year has risen to 33%. Data collated by the General Insurance Council shows that the retail health portfolio of non-life insurers up to July was Rs 3,596 crore, an increase of 17%; for standalone health companies, retail business jumped 47% to Rs 3,825 crore. This is the first time that the seven standalone health companies have done more individual health business than the 24 non-life companies. Overall, these non-life companies have seen their revenues up to July shrink by over 1% thanks to a 22% drop in motor premium.

Alamelu, however, said that the protection gap as reflected by the level of insurance claims was very low and this has serious implications for the financial health of the poor and the middle class. "As of Wednesday, the number of Covid-19 cases was 27.7 lakh while the number of Covid-19 claims was only 1.25 lakh. This means that 96% of the patients are not covered," she said. On the positive side the number of complaints with respect to Covid-19 claims was very few, she said.

She said that this has far more implications than during a natural catastrophe where the gap is limited to economic losses minus insured losses. In health, the costs were coming at a time when there was an economic contraction and loss of jobs. This could lead to economic distress not just for the poor but also for the middle-class. This also increased the risk of non-treatment or under-treatment as the epidemic moved to smaller centers.

According to Alamelu, this called for a rethink in the way health insurance is being undertaken. The Corona Kavach, a standardized cover specific for the treatment of Covid-19 designed by IRDAI, has seen sales of 7.5 lakh policies covering 12.8 lakh individuals with a premium of Rs 215 crore. The Corona Rakshak, the add-on cover has sold 1.9 lakh policies covering 2.2 lakh for a premium of Rs 29 crore.

"This is a sharp contrast to the sales of Aarogya Sanjeevani (an IRDAI designed standard health cover) which has seen only 72,000 policies sold," said Alamelu. She said that this indicated that people were willing to purchase ailment specific cover and a limited cover was better than no cover at all.

According to Mayank Bhatwal, MD & CEO, Aditya Birla Health Insurance, the size of the health industry is Rs 56,000 crore of which only 40% comes from retail buyers. The retail segment, which is growing at 30%, is expected to grow to Rs 60,000 crore by 2025. "Health insurance can help cushion the blow of Covid-19," he said.