There are a lot of questions around the accuracy of COVID-19 case and death data being reported by the governments on a daily basis. However, other related data could offer insights into the impact of COVID-19. The data on life insurance claims due to death as reported by the insurance companies indicates that the value of claims increased by 36% in the first three quarters of 2020-21 compared to the same period in 2019-20 and this increase is reported by most of the insurance companies.
The COVID-19 pandemic that began last year has brought upon loss of lives and a large-scale impact on health across the world. Although India has the second-highest number of COVID-19 cases, the fatality rate has been lower than many other countries badly affected by the pandemic.
While there are apprehensions on the reliability of the information being provided by the government authorities on a daily basis, trends observed in other sectors are analysed to ascertain the impact of COVID-19. One such sector is the Insurance sector.
Insurance policy offers financial protection and assistance in wake of any death, loss or financial need. As per the latest information available in IRDAI’s ( Insurance Regulatory & Development Authority of India) Handbook of Indian Insurance Statistics 2017-18, the Insurance Penetration for Life Insurance in India in 2017 was 2.76%, compared to the global average of 3.33%. The insurance penetration for non-life insurance is much lower at 0.93%, whereas the global average is 2.8%.
While the penetration of insurance is lower, it does make up for a sizeable number in view of India’s huge population. As the data Indicates, the idea of insurance in India is more synonymous with Life Insurance– as financial security in case of death or during old age. The number of those opting for non-life insurance coverage is comparatively lower with a good proportion of it due to the government rules & regulations (as in the case of Motor vehicle insurance). However, thanks to the corporate & employer initiatives and also an increased awareness, the uptake of health insurance are growing every year with the rising costs of private healthcare. Even in this space, most of the policies are part of employer benefits or government-sponsored health schemes.
IRDAI’s website provides information as part of ‘Public Disclosure’ by the respective Insurance companies in the country. We take a look at the latest information provided until Q3 of 2020-21 i.e., till December 2020 and analyse the trends during this period, compared to the previous years.
The value of Death Claims settled by LIC up to Q3 of 2020-21 up by 32%
As per the information shared by the public sector Life Insurance Corporation of India (LIC), during Quarter 3 (Q3) of 20-21, a total of Rs. 7.54 thousand crores were paid out against the death claims. Compared to the same quarter last year (2019-20), this is an increase of nearly 81%. This growth rate is way higher compared to the earlier years when it was only 5% and 8% respectively
- As seen in the case of GST, IT returns and others, experts opine that the phenomenal increase in Q3 is largely because a higher proportion of the claims were filed only after the lockdown was lifted in the latter half of 2020.
- However, the value of claims during the first half of 2020-21 also showed an increase when compared with the same period during 2019-20. During the first half of 2020-21, Rs. 9.15 thousand crores worth of claims due to Death were settled by LIC, compared to Rs. 8.47 thousand crores during the same period in 2019-20.
- Overall, by the end of Q3 in 2020-21, a total of Rs.16.7 thousand crores were settled as death claims. This is an increase of 32% compared to the same 9-month period in 2019-20. The growth is much higher than the regular growth rate of 2% in 2019-20, 19% in 2018-19, and 5.5% in 2017-18.
Apart from the substantial increase in the total value of death claims settled by LIC during 2020-21, a more significant trend is in regard to the number of claims made. Bucking a year-on-year decreasing trend observed in the previous year, a total of 8.16 lakh claims were made by the end of Q3 in 2020-21 compared to 6.97 lakh claims during the same period in 2019-20. This is reversing of the trend observed in the previous three years, where the number of claims due to death was lower than their preceding years. On the other hand, the value of claims settled due to policy maturity did not show a greater increase compared to earlier years.
Other insurers like SBI Life, ICICI-Prudential etc. also report an increase in the claims due to Death
Apart from the public sector LIC, many other Private Insurers also reported an increase in the amount of ‘Insurance Claims’ due to death in the first three quarters of 2020-21. There are 23 private insurers offering Life Insurance policies. Similar to LIC, even they are required to make public disclosure, the details of which are available on the IRDAI Website. As per the information provided by the private insurers (who have updated details up to Q3 of 2020-21), here are few observations.
- SBI Life, which has the highest claim settlement among insurers other than LIC, has reported that the value of claims due to death increased by 58% by end of Q3 in 2020-21, compared to the same period in 2019-20. Specifically, in the third quarter of 2020-21, the claims increased by 136% compared to Q3 of 2019-20. The number of claims due to death also increased from 12.4 thousand by Q3 of 2019-20 to 23.4 thousand by the end of the first 9 months in 2020-21.
- ICICI Prudential has reported an increase of 61% in claim amount by death by the end of Q3 in 2020-21 compared to the same period in 2019-20. In 2020-21, the total value of claims due to death for ICICI Prudential was Rs. 1.9 thousand crores compared to Rs. 1.2 thousand crores in 2019-20. In Q3 of 2020-21, the claims due to death settled by ICICI amounted to Rs. 862 crores compared to Rs. 425 crores in Q3 of 2019-20 increase of 102%. Around 1.28 lakh claims due to death were reported by end of Q3 in 2020-21 compared to around 75 thousand claims during the same period the previous year.
- Meanwhile, another large private insurer HDFC Standard Life, also reported that the total value of claims due to death increased by around 17% during the first 9 months of 2020-21. However, specific to Q3, it increased by 70%. A significant increase is also seen in the case of Tata-AIA.
- Few of the smaller Private insurers like Aegon, Bharti AXA, Star Union Dai-Chi have also reported an increase in the value of claims due to death by the end of Q3 in 2020-21, compared to the same period in 2019-20.
In most of the cases, there is a higher increase in the claims during Q3 of 2020-21 compared to the same quarter in 2019-20. As observed in the case of LIC, the proportion of the increase in 2020-21 is more than the increase observed in earlier years in the case of most of these private insurers. However, the trend is not uniform across the insurers, some of the insurers reporting fewer claims like Pramerica and Shriram Life.
IDBI Federal released its data for the entire year of 2020-21. A total value of Rs. 126 crores were settled as claims due to death during 2020-21 compared to Rs. 77.9 thousand crores i.e., an increase of 62%. If the trend observed until the end of Q3 and the reference of IDBI Federal is any indication, we can expect the total value of claims for the entire year of 2020-21 to be much higher than in 2019-20. We could witness a considerable & substantial increase in the claims settled as well.
While the trends vary, number of Health Insurance claims lower than previous year
As per the information available on the IRDAI website, about 33 insurers provide Non-Life Insurance. Among others, Health Insurance is one of the non-life insurances. Analysis of 10 of the large Non-Life insurers who provide ‘Health Insurance (HI)’ shows that variances exist in the trends of HI claims up to Q3 of 2020-21 compared to that of the same period in 2019-20.
Among the insurers analysed, United India Insurance and HDFC ERGO have reported a higher number of HI claims during 2020-21 (up to the end of Q3) compared to 2019-20. Most of the other insurers have reported fewer HI claims during the first three quarters of 2020-21 compared to the same period in 2019-20.
Analysis of the trends for each quarter shows that in the case of most of the insurers, the number of HI claims received during Q1 of 2020-21 is lesser, which has impacted the YTD (Year to Date) numbers. It ought to be noted that this period coincided with the nationwide lockdown in 2020. While there was an increase in the ensuing quarters, the overall numbers are still less than the numbers in 2019-20.
The Insurance claim information can offer significant insights of the impact of COVID-19 pandemic.
The information provided by the insurance companies regarding the claims due to deaths does not specifically highlight if the deaths were due to COVID-19. Hence, the increase in the number of death claims cannot be directly linked to the COVID-19 pandemic in the country. However, the data does indicate that the increase in the number of death claims in 2020-21 is at a much higher rate compared to the earlier years and this trend is more or less uniform across most of the Insurance companies. Such a higher rate of increase is only possible due to a specific event which, in this case, could be the COVID-19 pandemic.
On the other hand, the Health Insurance claims information reflects the impact of COVID-19 lockdown, but the hospitalization and other aspects associated with COVID-19 do not seem to have a bearing on the same. The initial challenges around most Insurances Companies not recognizing COVID-19 for cash-less insurance coverage and other uncertainties relating to extending health insurance to COVID-19 patents could be a factor in the reduced health insurance claims. At the same time, the impact of COVID-19 on the healthcare system, especially with respect to the treatment of other ailments and medical procedures is reflected in the health insurance claims data, that many non-emergency procedures may have been postponed leading to fewer claims. The lower numbers mean that the treatment of COVID-19 took primacy at the cost of other ailments.
The recent judgement of the Delhi Court and the norms laid down by IRDAI in respect to Insurance coverage of COVID-19 could pave way for an increased number of health insurance claims to be raised for COVID-19 related cases, especially in view of the devastating second wave in India.
Featured Image: Life Insurance Claims