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Insurers can respond to covid-19 by relaxing norms on claims and processes

03-Apr-2020

Many insurers have responded to the Covid-19 pandemic by introducing specific coronavirus products. This is useful but does not address the most important issues. Much more is needed. And fast.

Thousands of Indian travellers are stranded overseas trying to find their way home. This is expensive. A friend’s son had to advance his return from Canada. He lost 35,000 in cancelling a flight and paid 75,000 to book an earlier one. Another person got back from Europe, but had to first fly to Bangkok and then get to Delhi. Indians who are being quarantined overseas will incur testing, living and medical costs. Many of these expenses are excluded in their current overseas travel insurance. Flight cancellation costs are covered for specific named hazards and pandemics are sometimes not one of them. In some policies, quarantine and living costs are not payable. The industry can respond by accepting such Covid-19 claims, fully or partially, by considering pandemics a named hazard, even though they are not contractually bound to do so. New travel insurance plans should include this.

Senior citizens, particularly those with pre-existing conditions, are most vulnerable. The coronavirus products introduced so far do not cover this age group. We should cross-subsidize these plans for senior citizens by charging more from younger persons. That will fully leverage insurance’s ability to distribute risk.

There are broader issues as well. Individuals and companies are under severe financial stress. Companies are scaling down, people are losing jobs and payments are being deferred. Work from home has left companies unprepared even for the most routine banking activities. In such an adverse environment, renewing insurance is difficult, either because people and companies do not have the money to pay or are not able to complete the various renewal processes in time. The current quarter, which is also the financial year end, has the maximum amount of insurance renewals. The regulator has responded to this crisis by extending the grace period on life insurance by 30 days and condoning health insurance renewal delays up to 30 days. This is necessary. They should also consider allowing policyholders to extend their existing insurance by three months simply by paying a pro-rata three-month premium. The priority has to be that policyholders should, under no circumstance, be left uninsured. Because of the various lockdowns, even those who want to make an insurance payment will not be able to do so. Here, the sector should consider a waiver to Section 64VB of the Insurance Act that requires insurance premium to be paid before a cover is effective. Insurers, with approval from the regulator, could allow insurance plans to be renewed and the premium to follow a week or fortnight later.

Source : Live Mint

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