COVID-19 insurance policies Corona Kavach and Corona Rakshak have become loss-making products for most insurers, prompting them to seek re-pricing as the high claims payouts are eating into their profits.
To address the financial protection needs related to the costs of COVID-19 treatment, IRDAI had designed these two COVID-19 specific products after the spread of the pandemic in 2020. Corona Kavach is an indemnity-based standard health policy and Corona Rakshak is a standard benefit-based health insurance policy. Corona Kavach has sum insured options ranging from Rs 50,000 to Rs 5 lakh (in the multiples of Rs 50,000). Corona Rakshak has sum insured in the range from Rs 50,000 to Rs 2.5 lakh (multiples of Rs 50,000).
Both the policies come with options of three policy durations – three and a half months; six and a half months; and nine and a half months. Lifelong renewability, migration and portability are not applicable on these two products. These can be availed by persons in the age group of 18-65 years.
A top executive of a general insurance company, on the condition of anonymity, said Corona Kavach and Corona Rakshak have been making losses for most of the insurers. “All of us launches these products in July 2020. We are severely under-priced on Corona Rakshak and Corona Kavach policies.” The official compared the peak of the pandemic of other countries and of India, the country’s peak was higher than the other countries. “Our second peak has been double of our own peak and higher than any other country in the world. And I would be surprised if this product is making money for any of the insurers.”
He pointed out that most of the insurers and the reinsurers have asked the Insurance Regulatory and Development Authority of India (IRDAI) for re-pricing of these two policies. However, the official said it would be difficult to suggest what kind of price revision they are seeking as it differs from company to company.
Another executive said that Corona Rakshak and Corona Kavach are loss-making policies for the insurers. “Given that there are such huge underwriting losses, companies have been speaking to the regulator that an increase in the premium will help them. In life, we have already seen an increase in premiums.”
According to an ICRA report in June, based on analysis of the performance of 17 general insurance companies representing 90% of the industry-wide gross direct premium written, the industry’s underwriting losses are set to rise this fiscal due to higher claims payout. The government-owned insurers are expected to report high underwriting losses of Rs 12,400 crore to Rs 13,500 crore in the current financial year mainly on account of likely high claims ratio and health and motor portfolio.