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Impact of COVID-19 on Your Insurance Policy

COVID-19 has created a massive impact on human lives as well as the economy. The outbreak of the pandemic has broken strong sturdy global structures and everything has come to a standstill position. The complete shutdown of a large chunk of business has resulted in high fixed costs, high working capital, and low liquidity, etc.

The various measures taken by governments to reduce the spread of the coronavirus have created a severely negative and adverse impact on the different economic activities in many countries around the globe. The deeper impact depends on how long these measures need to be upheld and the monetary and fiscal actions taken to overcome the challenging situation which is worsening the economy at a rapid rate.

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It is equally important to understand the difference between the direct yet unrealized impact on fund returns which majorly include a drop in oil prices, drastic currency movements, and potential indirect impact through individual counterparty risk in which debt stakeholders are unable to repay loans due to local economic downturn. The clouds of uncertainty prevail as the risks are prone to being unpredictable and ambiguous. As a matter of fact, it is inevitable to control its impact on investments. This will largely depend on the longevity and gravity of the steps which will be taken.

Rise in Health Insurance

Based on the analysis of earlier epidemics, we figure out that there is a sharp rise in demand for term and health insurance policies during critical times. However, when we are stuck with the crisis it becomes difficult to quantify the rise in premium volumes. The same has happened with Covid-19 as the intensity and spread of this pandemic in India remains quite vague and unclear. Life and health insurance companies will likely be the key beneficiaries who will benefit from these if there is a surge in a number of affected people.

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With the increasing number of COVID-19 positive cases in India and the spread of this massive outbreak, people or the target audience is realizing the importance of having health insurance. As a result, even health insurance firms are trying their best to cater to seamless services and support their existing policyholders. If we talk about health insurance sales in March 2019, the sale of health insurance policies in March 2020 has also increased.

The increasing awareness among people has also boosted the importance of having health insurance and safeguarding their finances as well as their health. Generally, every year during the month of March the health insurance industry witnessed steady growth and acceleration in the sale of policies related to health insurance. The main reason is that people rush to purchase these policies as that marks the end of the financial year to reduce/save taxes.

With the launch of new policies related to coverage of coronavirus several insurers, people are actively searching for these need-based health policies that cover this pandemic to be ready against the menace. The main question here is are people investing in these policies?

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Insurance Regulatory and Development Authority of India (Irdai) issued a circular which declared that during these prevailing conditions owing to the COVID-19 outbreak, considering the need for easing the payment of health insurance premiums, all the insurers are allowed to collect health insurance premiums in installments”. This relaxation will be available for all health policies due for renewal up to 31 March 2021.

“If you are or become a victim of COVID-19, only a health insurance policy will come to your aid. So, this is the right time to cash in a suitable health plan (if you haven’t) for your financial safety. You can consider this plan for your purchase but ensure that you are opting for the adequate sum assured amount.”- Naval Goel (CEO & Founder of PolicyX.com).

This implies that one can now pay their annual health insurance premiums on a monthly, quarterly, or half-yearly basis. There is an option of availing this by writing to your insurer or getting in touch with the customer service using the available online touchpoints and asking for some ease.

What It Holds For Life Insurance?

Experts have stated that in the near term, with extension in lockdown, social distancing norms in place, the new business of life insurers will suffer drastically during this phase. Seeing the current scenario these companies will also be changing their rudimentary strategies and shall continue to move towards the online distribution model. Before this pandemic, earlier the digital channel used to contribute 3-4 percent of the total business. Now, the insurers are hopeful that the outbreak of COVID-19 will nudge policyholders to buy more protection products in the future. The insurance firms are also planning to sensitize their target audience and the customer base. Also, the market might take a new turn because of the new tax regime which would be lowering the attractiveness of life insurance as an investment product.

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The conclusion is that the COVID-19 pandemic is adversely impacting all the major aspects of life and every day has become a dynamic and evolving situation where the future is unpredictable. Organizations, investment firms, and large companies should draw their focus on increased claims ratio impacting profitability, budgets, cash flows, capital requirements, etc. The customers in return are seeking as well as obtaining fewer returns from traditional investments. This will continue as there is volatility in market-leading as low as 0% interest rates.

New creative business opportunities should emerge this time such as products providing pandemic coverage, cashflow coverage, force majeure exposure coverage.

Last but not the least, firms should review the impact of the virtual working environment as well as determine whether the application of new working practices and collaboration tools will be in sync with the new situation.

Shehnaz Ali Siddiqui
Shehnaz Ali Siddiqui is a Corporate Communications Expert by profession and writer by Passion. She has experience of many years in the same. Her educational background in Mass communication has given her a broad base from which to approach many topics. She enjoys writing around Public relations, Corporate communications, travel, entrepreneurship, insurance, and finance among others.

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