Pricing a Covid insurance policy is a big challenge for insurers, say experts

Pricing insurance products that cover treatment of Covid-19 is turning out to be a major challenge, especially for private players, given the lack of support by reinsurers, according to experts speaking at the Global Fintech Fest.

“Pricing that kind of a catastrophe... you’re looking at a very big game. And is it really the private insurers’ remit to cover every Indian? We are in the commercial business. We need to be able to price risk, we have shareholders, we also need to just do justice to the policyholders,” said Vibha Padalkar, Managing Director & CEO, HDFC Life.

“Today, there is not a single reinsurer that is willing to underwrite risk for us in terms of corona policy. So, why not ask those reinsurers as well that “guys, why aren’t you in this business?” And a lot of them are global reinsurers. For the high probability of policies, we will be retaining every single rupee of that risk on our balance sheet,” she added.

The session on ‘Insurance: Stepping up to the Covid-19 challenge’ was moderated by Radhika Merwin, Associate Editor, BusinessLine.

“Protection against death, disease or disability is a highly underbought segment,” said Yashish Dahiya, Co-Founder & Group CEO, PolicyBazaar. “I think the customer also needs to take responsibility. I believe the customer’s responsibility is buying insurance in time, not after a catastrophe has happened. Specifically, in the Covid situation, we have seen a lot of that,” he said.

Dahiya further said that only 45 million customers in the country purchase an insurance policy on their own and the amount is not sufficient for Covid-19 treatment.

Tapping digital space

One way to leverage the “opportunity” posed by the pandemic is to digitise the business and manage expenses accordingly.

“It is a bit of a conundrum that you are faced with a lot of headwinds. Here, it is the mother of all unknown. At the same time it is an opportunity. You don’t want to tear down your expenses to such an extent that it starts hurting. You do want to invest in technology because that’s a way of reaching your target customers,” Padalkar said.

According to Dahiya, health insurance has also gone hundred per cent telemedical. In life insurance, that number has jumped from about 30 per cent to about 60 per cent, he said.

This huge shift to digital can be further accelerated and better service can be provided to consumers using data, according to Dahiya.

Digital platforms account for 50 per cent of term insurance and 25 per cent of fresh business in health insurance, according to the PolicyBazaar CEO.