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Can Insurance Companies Stop Insurance Premium Collection in Lockdown?

The year 2020 is not going as well as everyone would have hoped. The global coronavirus issue has made the lives of people tough. Many working professionals are losing their jobs or getting furloughed. At the start of the year, many people predicted this year to be a stupendous year for life insurance in terms of business premium growth. In March, in FY18, the life insurance sector collected 17.04% premiums. Some companies have provided various guidelines regarding the same and revealed several policies, too. But, after this serious situation, it seems that matching the previous year’s peak’s is a daunting challenge.

The last three months of the financial year are traditionally the months which have witnessed the highest collection for the industry. With this increase in economic distress, some insurance companies incomes and profits are going south and thus forced to make changes in their rules and policies. Looking at this situation, consumers might be concerned about the hike in premium rates, especially regarding health insurance and two-wheeler insurance.

Health Insurance

Health insurance has been one of the only shining lights in the general insurance category. This insurance is offered either by multi-line general insurance companies or specialized standalone companies. The premium through multi-line companies was Rs 46,774 crore till February 2020, whereas the premium through specialized standalone companies was Rs 12,560.96 crore. If we add the premium rates, we can see that the health insurance segment had a 34% share in the total business of the general insurance industry.

The COVID-19 pandemic is going to be the biggest challenge for health insurance providers as the treatment may need prolonged hospitalization, which will be costly. As per IRDAI guidelines, coronavirus cases should be handled by the insurers expeditiously. As such, insurers will need to modify their health insurance policies claim to include coverage for COVID-19 before September 30, 2020. Premiums are expected to rise between 5-15% once the terms and conditions are suitably changed.

But while waiting for the right time to implement the plans, health insurance premium collection in March has taken quite a hit due to the current pandemic. Purchasing new health insurance policies is taking time because the insurers have to go through the process of medical testing if required, which has slowed down because of the general restriction on movement.

Is Your Health Cover in Danger?

Many people have some sort of health insurance plan in place and those who don't are undoubtedly giving it a second thought. However, as the virus is new, there is a lot of confusion if the virus cases should be covered under the current health insurance policies. On March 11, WHO declared COVID-19 as a pandemic, and therefore, insurers are no more obligated to entertain defined benefit claims. Despite this announcement, many health insurers like Star Health and Allied Insurance and Aditya Birla Health Insurance have come forward and announced that they will still be providing cover for the treatment of coronavirus.

This means that the future stages of the virus will decide the level of challenge health insurance companies will face. For obvious reasons, this event is likely to enforce the need for a health cover. This is seen as an opportunity for the health insurance industry to win the trust of prospective customers. Till the new rules are set in motion, however, they must follow all the existing rules and policies of the company.

Two-Wheeler Insurance

Many insurance companies have already spread their notice regarding changes in their policies. As it turns out, they have made certain changes for two-wheeler insurance as well. According to lockdown guidelines set by the government for motorists, pillion riders are not permitted on scooters and motorcycles.

Third-party car and two-wheeler insurance rates have increased every year in the range of 10-40% in the last ten years. The Insurance Regulatory and Development Authority of India (IRDAI) had previously proposed to increase the premium rates for two-wheelers with engines below 75cc to Rs 506 for the fiscal year 2020-21. Similarly, for two-wheelers between 75cc and 150cc, the premium was proposed to increase to Rs 769.

However, in light of recent events, IRDAI has decided not to raise the third-party insurance premium for cars, bikes, and other commercial vehicles. IRDAI has also extended the validity of premium rates beyond March 31, 2020. In simpler words, two-wheeler insurance providers shall continue to charge the same rates for Motor Third Party Liability Insurance Cover from April 1, 2020, until further notice.

Should I Renew My Policy Despite the Lockdown?

At the end of the day, even though premium rates have been lowered, you need to renew your health and two-wheeler insurance policies on time. Typically, if the insurance plans are not renewed on the due date, then they lapse and you lose all the policy benefits. You are then liable to pay the penalty and damage compensation on your own. The Ministry of Finance stated that the renewal date for insurance policies expiring between March 25, 2020, and May 3, 2020, has been extended to May 15, 2020.

In Closing

Insurance offices fall under exempted services during the lockdown and are facing numerous economic problems. Nevertheless, with the onset of the pandemic, the purchase of health insurance plans have increased considerably. In the likely event of a sharp rise in COVID-19 cases, insurance players with a robust digital infrastructure are predicted to fare better than others.

With the coronavirus spreading fairly quickly across the nation, many people can't help but be drawn towards policies that offer low premium rates, especially when purchasing insurance online. Thus, IRDAI has notified the public to be wary of fake health insurance plans and purchase coverage from registered insurers only. Always consult your financial advisor in case of any doubts.

Even when the dust settles, the country’s weakened economy is bound to persist in the near term with numerous pay cuts and job losses. Still, we should be ready to tackle any new issues during this tough period, and none should lose hope.

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