A number of life and health insurance companies, which did not revise their rates during the pandemic, are now looking to raise prices to keep up with inflation.
The insurance regulator also allows insurance aggregators to revise prices within a certain period. That said, most companies have not increased the cost of premiums, in order to meet consumers’ insurance needs during the pandemic.
The Covid caused significant business losses for insurers, with a sharp rise in loss ratios, which had put these companies under great pressure. As a result, insurance companies are currently reviewing hospitalization claims and considering raising premium rates. To add to this, in the wake of the emerging XE variant, loss ratios are expected to increase throughout the current fiscal year.
“Since some insurance companies did not raise premium prices during the Covid-19 outbreak, they are now considering revising the rates and have also requested the same. The intention is to allow policyholders to be financially secure for any type of medical treatment required by providing quality products and improving the consumer experience,” says Indraneel Chatterjee, co-founder of RenewBuy, an online insurance distribution platform.
According to sources, insurance players such as HDFC Ergo and Care Health have already received approvals for products with revised pricing. Niva Bupa also asked the regulator for revised products. Star Health also recently mentioned in its analyst call that it has increased its flagship health insurance policy by an average of 15% from August 2021.
According to industry experts, rising insurance premiums have been discussed for more than six months now, and it could happen anytime soon. As higher Covid claims have hit insurers hard, they would have no choice but to pass the cost on to consumers.
If the premium is not increased, the increase will put pressure on the company’s margins, which, in turn, will impact its profitability. If it increases slightly, the price increase will have a negative impact on both prices and margins.
What this means for customers
In the event of price increases by insurers, companies would have to increase the cost of premiums between 20 and 40%. This would imply a sharp increase in costs for average consumers considering purchasing an insurance plan. Also, there is another long-term impact to this. Even if the economy picks up and the market returns to normal, people will still have to pay for the increased premium structure until the policy matures, which is at least 25 at 30 years old. And one cannot wait for market prices to be reduced, as this would greatly increase the risk.
However, going without insurance for a year or two is also not a desirable option. Irrespective of the premium, one would have to keep buying insurance plans for his safety.