Money & Banking

Covid effect: Rise in claims impacts insurers

Surabhi Mumbai | Updated on July 30, 2021

With bottomlines hit, they have raised reserves to meet future Covid claims

Insurance companies have been battling a deluge of Covid-related claims that impacted their bottomlines in the first quarter of the fiscal.

While general insurance companies have seen a spike in health claims since the start of the pandemic last year, life insurance companies have reported higher claims after the second wave.

Future claims

Apart from a drop in net profits in the quarter ended June 30, 2021, life insurers also increased provisions and reserves for future Covid-related claims. A number of companies are looking at another round of price hikes – both in health and term policies.

SBI Life Insurance, in an analyst call after the first quarter results, indicated that it received over 28,000 death claims in the first quarter of the fiscal, with gross claims of ₹1,576 crore and net of reinsurance claims of ₹1,315 crore.

“For the quarter, gross Covid claims stood at ₹732 crore, while net of reinsurance claims stood at ₹570 crore,” said Motilal Oswal in a report on SBI Life Insurance.

HDFC Life Insurance also reported a steep rise in death claims, with peak claims in the second wave at around three to four times the peak claim volumes during the first wave.

“We paid over 70,000 claims in the first quarter,” it said in a regulatory filing. The gross and net claims provided for amounted to ₹1,598 crore and ₹956 crore, respectively.

ICICI Prudential Life Insurance registered total claims for the first quarter of the fiscal at ₹1,119 crore compared to ₹354 crore last fiscal. Net of reinsurance claims amounted to ₹500 crore for the insurer.

Non-life insurers

Similarly, Covid-related claims also impacted non-life insurers.

For ICICI Lombard General Insurance, Covid-related health claims shot up to ₹600 crore in the first quarter of the fiscal from ₹340 crore a year ago.

In an analyst call after its results, the insurer said that given the adverse claims experience, it has raised its pricing on selective renewals and in group health business by about 15 per cent to 20 per cent.

In the investor presentation, Bajaj Allianz General Insurance said that though the severity of Covid claims was lower than the peak severity observed in 2020-21, the frequency of Covid claims has increased – 82 per cent of the total Covid claims of last fiscal were already booked during the first quarter of 2021-22.

Experts point out that premium growth has been good and is slowly reverting to pre-pandemic levels.

“The impact of Covid is evident on insurance companies in the first quarter, but we will have to see how the pandemic plays out and whether the expected third wave is as intense as the second wave.

“We are yet to reach pre-pandemic level, but premium growth is likely to see traction in the fiscal,” said Saurabh Bhalerao, Associate Director – BFSI Research, CARE Ratings.

Most insurers, however, stress that they are well placed to deal with Covid-19 claims, but are also watchful of a possible third wave.

“The mortality claims were in line with expectations for life insurance companies. There could be some more claims in the coming months from the first wave due to a lag in reporting,” said an executive with a life insurance company.

Published on July 29, 2021

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