Insurers are hoping that the Indian government sets a cap on the Covid-19 treatment cost like it did with testing. If that doesn’t happen, insurers are in for a wild ride. But even in the absence of such an assurance, some insurers have already taken the plunge by launching Covid-specific covers. What gives?
The disease-cover route
The biggest problem for India’s insurance sector is people’s fatalistic belief that it won’t happen to them. Not many want to spend on a premium of Rs 10,000 a year for something they don’t consider likely. And even many of those who buy a policy look at it as a tax-saving instrument.
Employers, too, purchase coverage for their workers—usually group policies—but these cover expenses of only around Rs 1-3 lakh ($1,312.7 – $3,938.3)—a sum that would only partially cover a major hospitalisation.
Instead, insurers find it easier to nudge people into buying insurance via disease-based coverage. Like a dengue-specific policy if monsoons are severe where you live; a diabetes or cancer care insurance if you are genetically predisposed to it. In general, critical illness policies that cover for cancer sell more than infectious disease policies, said Dr Prakash. People also tend to renew critical illness-based covers more than a dengue cover.
Yearly premiums for such policies are less than Rs 1,000 ($13.13), while offering significant coverage. Moreover, a diabetic person wouldn’t be allowed to buy a general health insurance policy even if they wanted one. But that’s not the case with disease-based covers, which can be bought even by people who are already suffering from a disease.
For insurers, disease-based covers are, in theory, good products to sell as their loss ratios are lesser than those of general health insurance plans. This makes them a favourable proposition for insurers.
However, they are still not profit-making products, according to the senior executive quoted earlier. For starters, they only really sell online, and usually as add-on products. Insurance agents, after all, earn commissions on policies sold, so low-ticket products aren’t something they care to flog. The problem with selling digitally, though, is that most insurers say they don’t have the budget for digital marketing. As a result, insurers generally view these policies as a way to get a foot in the door to upsell general health insurance coverage.
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Take Digit, for example. Its Covid-19 policy is a way of promoting its recently launched health insurance product. Call it foresight or just plain luck, Digit had filed for need-based insurance for health under the IRDAI’s sandbox regulations and had received an approval in January 2020.
“While we were contemplating the best manner to project this sandbox application, we witnessed the rapid increase of this disease in India,” said Vivek Chaturvedi, head of marketing at Digit. “We finalised on the modalities and documents, and it took us about two weeks to launch the policy. All we had to do was change the variables [like frequency and severity of the disease] in our database and we had a new product.”