Life insurers spend Rs. 2,000 crore on COVID-19 death claims
What's the story
A total of 24 life insurance companies spent crores of rupees on COVID-19 death claims that are over and above the death claims that they usually receive every year. By March 25, life insurers had paid Rs. 1,986 crore toward 25,500 coronavirus death claims, according to the data compiled by the Life Insurance Council. Here are more details on this.
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What will be the impact of this amount?
The said amount is not alarming to the extent that it will alter the balance sheet or solvency ratios of companies. It will, however, take a toll on the profitability of companies prompting them to reconsider their mortality assumptions. It can also bring about a change in the pricing of product offerings, especially group term policies.
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30% increase in death claims last year: IndiaFirst Insurance
RM Vishakha, Managing Director and Chief Executive Officer, IndiaFirst Life Insurance, said, "Our increase in death claims over last year is about 30 percent. Up to March, we have paid around Rs. 45 crore toward 682 claims related to COVID-19." "This does not impact our balance sheet due to adequate reserves for unforeseen events though it will hit profits for the year," she added.
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'It impacts mortality assumptions in product development'
"However, it impacts mortality assumptions in new product development. The impact will be felt more directly on group term policies that are annually renewable. In long-term savings products, companies have higher risk tolerance ability and a longer duration to absorb volatility," she further said.
Other details
HDFC Life settled 1,700 claims; SBI Life settled 5,000
HDFC Life, one of the largest private sector life insurance companies, has settled 1,700 COVID-19 claims. Meanwhile, SBI Life saw around 5,000 COVID-19 claims for which it paid out approximately Rs. 340 crore. Further, a similar rise in death claims was reported by other companies as well, with ICICI Prudential Life settling claims of Rs. 340 crore.