COVID-19 Pandemic Challenges in Life Insurance

What is life insurance?

Life insurance is basically a contract between the policyholders and the insurance companies. As a policyholder buys a life insurance policy, he/she has to pay premiums regularly and as the policy matures, they will get maturity benefits. In case the policyholder passes away, the death benefit is provided to the beneficiary/nominee of the policy. A policyholder can also opt for various riders which will boost their policy benefits.

Challenges Faced by Insurance Industry in India during COVID-19

Although there had been a surge in buying life insurance policies, especially term insurance policies during the COVID-19 pandemic in India, the insurance industry also had to come across certain challenges. Many policyholders lost their jobs and went through major losses in their businesses. This led to them being not able to pay the premiums for their insurance policies. During this time, the industry went ahead to help its policyholders. Let us see how.

• To extend help to the policyholders, the Insurance Regulatory and Development Authority of India (IRDAI) in 2020 directed the insurance providers to offer a grace period of 30 days to the policyholders for the payment of the renewal premiums.
• In addition to this, the IRDAI also directed the insurance companies to continue their operations as well as services for the policyholders through other modes. The alternate modes include online chat and telephonic conversations.

The insurance companies had to abide by all the directions provided by the IRDAI but they had to face a lot of challenges. They had to be available for chat support as well as telephonic calls 24X7. Also, providing a grace period to each policyholder impacted the growth of the insurance companies. Many insurance companies reportedly have undergone losses. Several policyholders also withdrew their policies for meeting their short-term needs.

Challenges for Fresh Policy Buyers

Policy buyers who are trying to purchase fresh insurance policies are finding it a bit challenging as they have to provide information about their COVID history. This helps the insurer to calculate the premiums based on their COVID history.

In any case, a new applicant now has to pay higher premiums. The premiums for life insurance policies are calculated based on the medical history of the policy buyers. Since the claim numbers escalated during COVID-19, it led to an increase in premium prices.

In many cases, the life insurance companies are even rejecting applications if they do not find the health condition of the policy buyers favorable.

Challenges for COVID-19 Survivor Applicants

Fresh applicants who have a history of being infected by coronavirus may face higher challenges as compared to applicants who were not infected. They will not only be required to pay additional premiums but also have to face a longer waiting period. To reduce life risk, the waiting period initiates from the date of COVID negative test result.

While providing the COVID-19 medical reports, the applicants would be required to submit additional medical reports of various diseases and health conditions such as lung diseases, diabetes, lifestyle diseases, etc. This is to check if the applicants developed these health conditions as side effects of COVID-19 and the related medications. Based on the medical reports, the applications are rejected and the premium prices are decided.