ABSTRACT
The COVID-19 pandemic indeed had a significant impact on various countries, including India. The healthcare sector faced immense challenges and required substantial investments to effectively manage the crisis. India, being a financial hub with global connections, experienced economic disruptions due to the pandemic. The Indian healthcare system had to respond swiftly and efficiently to combat the spread of the virus. The government allocated funds, resources, and manpower to address the situation. Relief packages were introduced to support marginalized communities and cover essential costs. Research centers played a crucial role in mitigating the impact and preventing further damage. Analyzing the short-term and long-term effects of the pandemic on India’s healthcare sector is essential to devise strategies for enhancing efficiency and equity in healthcare delivery. It focuses on how health insurance and life insurance industry have been impacted in respect of technological advancements and the increase in premiums. It is vital for the country to continue investing in healthcare infrastructure to better handle future health crises.
Keywords: coronavirus; covid-19; Life Insurance, Health insurance, Technological Advancements, Pandemic, Business Growth.
INTRODUCTION
The insurance industry in India has indeed experienced significant growth since the year 2000, with a distinction between Life Insurance and Non-life Insurance. Both sectors are overseen by the Insurance Regulatory and Development Authority of India (IRDAI), which regulates and supervises the entire insurance sector in the country. All insurers must adhere to the rules and regulations set by the IRDAI. In India, there are a total of 57 insurance companies, with 24 offering life insurance and the remaining 33 providing non-life insurance. Life insurance companies offer a wide range of products under individual and group schemes. The Covid-19 pandemic and subsequent lockdown have had a negative impact on various sectors of the economy, including the life and non-life insurance businesses. There has been a decrease in new policy sales, an increase in policy lapses, delays in premium payments, and an estimated loss of around four million policies and premiums valued at approximately Rs 45,000 crore. According to the Managing Director of LIC, renewal premiums worth around Rs 30,000 crore have not been received due to the current situation. The insurance industry in India has witnessed a shift in saving habits among middle-income individuals due to increased life risks and uncertainties brought about by continuous lockdowns. The ongoing slowdown is expected to have further adverse effects on new business premiums, policy revivals, renewals, and overall sum assured, with a reported decline of 9.2 percent to Rs. 12.6 lakh crore between April and July 2020 as per a CARE Ratings report.
The prolonged lockdown from March to May 2020 led many insurance companies to provide a two-month grace period for reviving lapsed individual life insurance policies. There has been a decrease in the uptake of new insurance policies, particularly among lower- and middle-income groups, while growth in new business has been primarily driven by high-income individuals. According to experts, the Global Data Company report indicates a projected decline of 0.9 percent in the Indian life insurance business in 2020 compared to an 8.8 percent growth in 2019. This decline is attributed to financial uncertainties, job losses, and stagnant income growth amid the pandemic. While there has been a surge in demand for pure insurance and health products, interest in unit-linked and other life insurance policies has been low due to liquidity constraints and income uncertainties. However, post-lockdown periods have seen efforts to rejuvenate the life insurance sector through customer-centric innovations to maintain profitability. Despite the challenges posed by the pandemic, the insurance industry continues to generate revenue and offers significant growth opportunities in both life and health sectors. The perceived risks of life have prompted many customers to invest in term plans and other life insurance policies to safeguard themselves and their families against future uncertainties.
Research Methodology: The present research is mainly based on secondary data collected from reputed journals, articles and the reports of Insurance Regulatory and development authority (IRDAI) and websites.
IMPACT OF COVID-19 ON HEALTH INSURANCE
The Indian health insurance sector has indeed experienced a significant rise in new policy enrolments, with insurance queries estimated to have increased by about 40% in a specific region of the country. The IRDA issued a circular dated 04 Mar 2020 advising that claims for hospitalization, including expenses incurred during quarantine, should be processed promptly. This suggests that insurers may anticipate an increase in claims for hospitalization costs due to CO19 diagnoses (IRDA 2020). The observed impact is likely to have long-term effects. Fixed costs like doctor salaries, employee expenses, and consultation charges (contributing 50%-60% to a hospital’s overall costs) may not be deferred. Additionally, the rise in procurement costs of consumables such as medicines and sanitizers from the pharmaceutical sector for healthcare companies could affect their margin profiles.
India’s healthcare system faced challenges in dealing with an increasing case load due to factors such as a large population, resource variations across regions, and a weak public health system. In terms of funding, only 1.5% of the 3.6% GDP investment in healthcare comes from the Government, with more than 2% being borne by households, leading to 65% of healthcare expenditure being out of pocket. When COVID struck, the system was underprepared to handle this emergency due to these limitations in funding and preparedness. Moreover, the rise in procurement costs of consumables such as medicines and sanitizers from the pharmaceutical sector for healthcare companies could impact their margin profiles.
The pandemic has indeed shifted people’s concerns significantly. Before COVID-19, many worried about managing healthcare costs if someone in their family fell seriously ill. However, now the focus has shifted to keeping families safe from the disease itself, with 54% of people expressing this worry. The lockdowns have led to concerns about job security and loss of income for about half of the population. The emergence of diseases like H1N1, SARS, MERS, and most recently COVID-19 has highlighted the importance of public health preparedness. The impact of the COVID-19 pandemic has been profound, reshaping our priorities and perceptions permanently. It’s true that the expansion of clinical services and the rising costs of treatment are concerning issues. The Max Bupa survey findings highlight the varying levels of concern across different cities. In Lucknow, 95% of young adults are worried about this issue, while only 51% of youths in Delhi share the same concern.
One effective solution to address these concerns is to purchase a health insurance policy. Health insurance helps cover medical expenses in case you or your family members fall ill. Raising awareness about the importance of having health insurance is crucial, especially in cities like Lucknow where health insurance coverage is low.
The insurance companies are now preparing for a reality where such pollution outbreaks could become the new normal after many organizations were left behind during the COVID-19 crisis. On a larger scale, the introduction of pay-as-you-use is likely a significant development in the history of motor insurance in India as it aims to become more responsive to the usage and needs of customers. The recent outbreaks of viruses like COVID-19 have increased awareness among people towards insurance, with a majority now considering it a necessity to be prepared for unforeseen circumstances, at least for the future. Prior to the COVID pandemic in India, only 10% of individuals were interested in purchasing insurance to cover healthcare emergencies, including infectious and pandemic diseases. However, now 71% of people view health insurance as essential to combat unexpected pandemics like COVID-19.The survey conducted by a private sector health insurance provider stated, “COVID has brought about a shift in people’s mindset. There has been a significant change in people’s perception regarding the importance and benefits of health insurance during a pandemic situation like COVID-19.”
Over the past few years, digital innovations have been transforming the insurance industry globally. The increased focus of insurers on digital platforms through apps and social media has enabled them to directly reach and engage customers. Simultaneously, significant progress has been made in the background through e-KYC and cloud systems, allowing insurers to better assist customers. Insurers are now prioritizing the digitalization of core business processes, investing in advanced analytics, data, and digital technologies to enhance their understanding of customers. The ongoing shift towards digitalization was accelerated by the pandemic, paving the way for a future where customers can expect better options in the coming months. The last five months have been transformative for India, impacting both its people and businesses. India is currently among the top three countries most severely affected by the COVID-19 pandemic.
IMPACT OF COVID ON LIFE INSURANCE
It’s evident from the survey results that the pandemic significantly impacted various aspects of life insurance operations. New business growth, premium collection, and policy procurement were notably affected. The pandemic influenced the social and mental wellbeing of employees, work-life balance, and domestic issues. Organizations had to swiftly adopt digital solutions and address challenges related to supply chain, outsourcing, and cloud services. During this period, Risk Management became crucial for companies to implement effective Disaster Risk Reduction (DRR) systems to restore normal business operations. Regulators introduced proactive changes and new guidelines to safeguard policyholders’ interests and ensure the smooth functioning of the insurance industry while enhancing financial stability. This section highlights the key business implications of the pandemic and outlines how life insurance companies navigated through it by implementing proactive business strategies and customer-centric operations.
The analysis of the survey data revealed the impact of COVID-19 on the life insurance industry’s operational and financial performance. The total premium collected in the Life Insurance Sector was compared for different periods, showing a significant negative variation during the first wave of the pandemic (March 2020 to December 2020). Both LIC of India and private companies experienced a similar decline in financial results due to the challenges posed by the lockdown and restrictions on traditional premium collection methods. During this period, IRDAI took proactive measures such as extending grace periods and issuing industry-friendly guidelines to minimize disruptions. Companies adapted by making process changes and embracing digital solutions to ensure continuity of service. The first quarter of New Business was disrupted, but there was a recovery in June, with a 10% drop for the month and an 18% decrease in total premium collected by June 30, 2020. The number of policies procured also saw a significant decline compared to the previous year.
Despite these challenges, the life insurance industry showed resilience and made a significant recovery by March 2021, with a positive growth of 7.5% in new business premium. The pandemic led to several positive changes in the industry, including IRDAI’s Sandbox Regulations promoting innovation, increased focus on health insurance, faster adoption of digital distribution processes, and raising awareness about the importance of risk protection products among customers. Life insurers have significantly focused on boosting new business sales through direct distribution channels and enhancing the digital capabilities of both employees and intermediaries. They have adopted new distribution strategies emphasizing customer engagement, retention tools, personalized product lines, and innovative service models. Prioritizing the use of Big Data, cloud-based operations, data security, and cyber risk management has become crucial for insurers.
According to a McKinsey report, companies accelerated digitization and automation during the COVID-19 pandemic due to restrictions on travel and changing consumer behaviour. The report also suggests that remote work arrangements may persist in certain areas for an extended period. Insurtech joint ventures have become a growing trend, enabling partnerships between Insure-Techs and established insurers to leverage customer data and relationships for creating new income streams. Proactive risk assessment utilizing IoT technology is transforming risk assessment and underwriting processes, allowing insurers to shift from risk protection to risk prevention. India is emerging as a significant hub for IoT deployment, particularly in areas like managing street lighting and ensuring public safety. The pandemic has fueled the demand for contactless technologies, leading to advancements in policy aggregator platforms, insurance-specific technologies for risk assessment, claims processing, and customer service. This technology disruption has contributed significantly to the industry turnover, with the digital side contributing around US$ 280 billion.
CONCLUSION
The results of the study indicate that the health insurance sector plays a significant role in the overall insurance industry, with its share remaining consistent even before the pandemic. Additionally, the study reveals a decrease in the share of the public sector within this segment. Conversely, there is an observed upward trend. The study highlights the growth of private health insurance, particularly accelerated by the Covid-19 pandemic. Post-pandemic, there has been a remarkable growth rate in health insurance, indicating significant potential for expansion in the sector during the new normal. However, health insurance companies are encountering challenges such as higher claim costs, uncertainty around treatment expenses for Covid-19, difficulty in predicting healthcare costs, and pricing of insurance products. Moreover, the industry is shifting towards digitization, necessitating the development odigital distribution strategies and user-centric platforms for policy issuance and claim processing.
The study aimed to analyze the performance of the insurance industry in India before and after the Covid-19 pandemic, focusing on the changing trends and challenges faced by life insurance providers. The research utilized an exploratory research design to achieve its objectives.
The insurance industry plays a critical role in the economy by saving lives, promoting investment, encouraging household savings, and generating significant employment opportunities for the youth. Along with the banking sector, it contributes more than seven percent to the GDP of the economy. Like other sectors, the insurance industry has been significantly affected by the current Covid-19 situation, leading to a decline in new policy business, delayed premium payments, increased policy lapses, and financial challenges in claim settlements due to the rise in Covid-related deaths.
To address these challenges, insurers need to innovate with more customer-centric solutions that offer multiple benefits to policyholders. During the Covid-19 period, several changing trends have been observed, including increased awareness of the importance of life insurance plans, a significant growth in demand for health and pure life insurance, and an increase in online insurance business.
Insurance companies are facing liquidity issues in the short run and solvency problems in the long run if the pandemic persists. Despite the hurdles faced by insurance companies during these tough times, effective policy measures can turn challenges into opportunities by offering more digital services to customers, such as online policy information, policy purchases, premium payments, and quick claim settlements. All customer services are available at the doorstep, and insurance employees are allowed to work from home, reducing operational costs and other expenses. In the current uncertain situation with high life-related risks, people are increasingly investing in long-term insurance to secure their families and loved ones. Both pure insurance and health insurance present great opportunities for insurance providers.
ISHIKA AGARWAL
AMITY UNIVERSITY, KOLKATA
