Insurers Refuse To Renew Group Life Covers Or Want Up To 150% Higher Premiums

Copies of the application for the Health Insurance (Photographer Andrew Harrer/Bloomberg)

Insurers Refuse To Renew Group Life Covers Or Want Up To 150% Higher Premiums

Life insurers are either refusing to renew group covers or have increased prices as claims spiked during the pandemic, according to insurance advisers.

“A significantly higher number of companies are refusing to provide cover (underwrite risks),” said Gurpal Singh Dhingra, director at Prudent Insurance Brokers. A few that are renewing policies want 40-50% higher premium if the fiscal ended March ended without claims, Dhingra said citing quotes he received for clients. For plans that saw claims, they’re quoting a 100-150% hike, he said.

While India has reported a lower Covid-19 mortality rate than developed nations, like some of its neighbours, still more than three lakh people have succumbed to virus-related complications—the third-highest toll in the world. Reports during the second wave of the pandemic also suggest large-scale undercounting. And a year of higher mortality and healthcare expenses means higher insurance claims.

A group term life policy covers multiple employees under a single plan and the payout is made on the death of a member. Competitive pricing in the past kept costs low. But Dhingra, citing a conversation with a few companies, said claims ratio rose to as high as 200% claim in pandemic-ravaged fiscal.

BloombergQuint earlier reported that Life Insurance Corp., the nation’s largest life insurer, saw the number of claims jump 21% in nine months ended December. And for SBI Life Insurance Co., non-Covid mortality claims surged 74% in FY21.

Such spikes, Dhingra said, prompted an increase in premiums. Moreover, reinsurers tightened underwriting as India faces a much severe second wave unlike the rest of the world, he said. And companies don’t yet know the long-term implications of Covid-19 on health and mortality.

The novel coronavirus affects important organs like the lungs and insurers are likely to wait and watch. Also, the severity of the disease has varied by geography, creating uncertainty about target groups. Mutations only add to ambiguity.

BloombergQuint's emailed queries to LIC, SBI Life, HDFC Life Insurance Co. and ICICI Prudential Life Insurance Co. didn’t elicit a response.

According to Rakesh Goyal, director at Probus Insurance Brokers, the terms of policy renewal will remain stricter for the next 12-18 months. Covid history and co-morbidities among the member group will be looked at more seriously and payouts may come with conditions at the time of renewal, he said.

Brokers said insurers may insist on stricter medical check-ups for renewals, like in the case of individual policies. Companies have already reduced the renewal window from 30 days prior to the last date of the policy to 15. And they have added additional Covid-related clauses to limit immediate risk and liability.

And international reinsurers have hike prices twice already.

“Last year, after the outbreak of Covid, the international reinsurance market rates increased by 15-20% because more population was vulnerable to death which was not the case earlier,” said Anuraag Sunder, managing director at J Syzygia Consultants. And then they increased premiums by 20-30% after actuarially calculating death rates.

Indian reinsurers followed suit, he said. And Sunder anticipates the rates to spike even more after India’s deadlier second surge.

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