The nationwide lockdown has affected insurance industry severely. PwC, in its latest report says that insurance businesses – life, non-life and health saw a decline of 20% in net sales during lockdown.
PwC said, “The two productive months for the insurance industry — March for life insurance and April for non-life corporate renewals — have both seen a significant hit and the difficulty continues in the month of May in mobilising the distribution channels.”
The report suggested that insurers should focus on business continuity plan, employee safety and stakeholder communication to grow business from here.
The report has also analysed impact of coronavirus pandemic on insurance business. Let us look at it.
Impact on life insurance
Pure term policies will continue to gain traction due to fear caused by coronavirus pandemic and easy availability of these policies through online channels. However, people who are facing financial constraint may delay their buying decision for a while.
Further, the PwC report said that long-term guaranteed products like traditional policies will look attractive but insurers will face challenges in marketing these products due to low interest rates. Moreover, people may also start valuing liquidity and hence, there could be stress on long-term pension products.
On ULIPs, the report said that consumer confidence in the stock market will be badly hit and hence, only a few savvy customers who believe in buying at the bottom will start new policies now. Existing customers would be well advised to stay put and not try to redeem prematurely as the SIP rupee cost averaging is going to help them.
Overall, the PwC report said that the buyer-seller trust deficit has to be bridged now and insurers have to understand the behavioural economics of this aspect.
Impact on general insurance
For India, where insurance penetration is very low, general insurance typically covers all organised industrial activity and workers in the organised sector.
Since a large proportion of this sector is dependent on industries and businesses such as automobile, travel, hotels, infrastructure, construction and manufacturing, challenges in these sectors create additional issues for the general insurance industry.
Within general insurance, the PwC report said that challenges faced by the motor insurance segment would include lack of purchase of new vehicles as well as claim surveying.
Impact on health insurance
The COVID-19 pandemic is challenging for the health insurance industry on various fronts; at the same time, it represents an opportunity. Health insurance is expected to cushion the blow that this pandemic will deal.
In fact, there has been greater concern and awareness about health and enquiries about health insurance policies have increased by 30–40%. The pandemic also provides an opportunity for insurance companies to innovate and serve the evolving needs of a more informed population. Several insurance companies have launched COVID-19 insurance products in March 2020. Other companies may follow suit and introduce such products. These products tend to be short term and carry fixed benefits, covering a fixed amount in excess of the hospitalisation schemes.
IRDAI has instructed insurers to accept COVID-19 related claims under active health insurance policies. Since the risk of COVID-19 is not currently priced under active products, these claims may cause an additional burden on the books of insurers if treated outside government hospitals, said the report.