Life insurers pay out Rs 11,060 crore in Covid-19 death claims

Covid death claims for insurers in Q1 were hig­her than the cumulative claims in the entire FY21.
Life insurers have so far shelled out Rs 11,060.5 crore to settle Covid-related death claims, a huge chunk of which came this financial year when the second wave ravaged through the country, data compiled by Life Insurance Council — a representative body of the insurers — has revealed.


As of October 21, life insurers settled a little over 130,000 Covid-19-related dea­th claims. About 140,000 Co­vid-related claims have been made so far, amounting to Rs 12,948.98 crore, of which 93.57 per cent by volume and 85.42 per cent by value were settled.


In FY21, the industry received 22,205 such claims worth Rs 1,644.56 crore, which amounted to 0.3 per cent of total premium income of the year. Of these, 21,854 death claims amounting to Rs 1,492.02 crore were settled.


While the death claims have not had an impact on the solvency of the insurers, it has dented their profitability. Insurers have been keeping excess mortality reserves and the extra provisioning has resulted in muted profitability for most, especi­ally in the April-June quarter (Q1FY22), when the second wave hit.


Covid death claims for insurers in Q1 were hig­her than the cumulative claims in the entire FY21. Top-three private life insurers, who are listed on the bourses, reported a sharp fall in their net profit because they significantly increased their provision in anticipation of higher claims.


While the claims burden has come down, insurers are still holding sufficient reserves so that they can cushion their balance sheet against any risk in the future with regards to the Covid-19 pandemic.


ICICI Prudential Life Insurance is holding an excess mortality reserve of Rs 412 crore at the end of the July-September quarter (Q2) for future Covid-19 claims. As far as HDFC Life is concerned, it is holding a reserve of Rs 204 crore at the end of Q2 for future claims, but it has not factored in the third wave. The other large, listed player, SBI Life, has not declared its Q2 earnings yet.

 “While individual claims tapered off, the group claims intimation was high in Q2. The overall experience has been well within our projections,” said Vibha Padalkar, MD & CEO, HDFC Life, post its Q2 earnings.


“We believe the Rs 204-crore provision is adequate for the deaths that have happened, but have not been intimated to us. What we have not accounted for is the third wave,” she added.


Satyan Jambunathan, CFO, ICICI Prudential Life Insurance, in the analyst call post the company’s earnings said, “...beginning June 2021, we saw a significant reduction in new Covid-19 infections in the country. However, we continued to receive claims in Q2FY22, most of which were pertaining to Q1FY22, i.e. delayed intimations. We have also seen a significantly declining trend in these intimations across the months of this quarter.”


“With a provision of Rs 412 crore and net claims of Rs 862 crore (Covid-19 claims) for H1FY22, unless Covid-19 claims in this year exceed Rs 1,274 crore, we would not expect any further negative impact,” he said.


The worsening mortality experience for life insurers in the country accentuated by the pandemic has prompted reinsurers to re-evaluate their prices on term plans. Munich Re has intimated to insurance companies, whose risks it is covering, about a price hike. Insur­ance firms are engaged in discussions with the reinsurer on the quantum of the hike. The re-pricing might not be entirely because of Covid-19, but it has certainly played a big part.


Padalkar said, “We have received the intimation on re-pricing and this is expected to kick in the fourth quarter. We are discussing it with the reinsurers and the final quantum of the premium hike is yet to be finalised. We will follow a risk-based pricing approach rather than passing on everything to the customer.”


The premium hike may be 10-15 per cent, she said.


“It’s going to be hard to attribute how much of the price increase is coming from Covid or non-Covid, it’s a composite increase…,” Jambunathan said.


“...My general sense is that you wouldn’t seek to recover a one or two-year Covid claim into long-term price. So, I would expect the pricing to substantially reflect a view on underlying mortality and not be oriented more towards Covid,” he added.

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