Tuesday, Jun 28, 2022
Outlook Money

Insurers Look Towards Hiking Prices As Covid Subsides; Hike To Hit Consumers

A lot of life and health insurance players are looking to raise charges that are likely to be passed on to consumers. Higher premiums may mean profitability to insurers, but this could hit policyholders hard.

Insurers Look Towards Hiking Prices As Covid Subsides; Hike To Hit Consumers
Many insurers are now considering increasing premiums on their policies .

A number of life and health insurance companies, who have not revised rates in 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 of time. That said, most companies did not raise the premium costs, in order to cater to the insurance needs of consumers during the pandemic. 

Covid has resulted in major business losses for the insurers, with a sharp rise in claim ratios, which had put these companies under a lot of pressure. Hence, insurance companies are now reviewing the hospitalisation claims, and are considering on raising the premium rates. To add to it, in the wake of the emerging XE variant, claim ratios are expected to increase throughout the ongoing financial year.

“Considering that some insurance companies have not raised the premium prices during the Covid-19 outbreak, they are now thinking of revising the rates, and have also applied for the same. The intent is to enable the policyholders to be financially secure for any sort of required medical treatment by delivering qualitative products and enhancing the consumer experience,” says Indraneel Chatterjee, co-founder at 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 has also applied to the regulator for revised products. Star Health, too, recently mentioned in their analyst call that they have taken an average hike of 15 per cent on their flagship health insurance policy from August 2021. 

According to industry experts, the hike in insurance premiums has been discussed for over six months now, and it could happen anytime soon. As the higher claims of Covid have hit the insurers hard, they would have no choice, but to pass on the cost to consumers. 

If the premium is not increased, the hike will put margins of the company under pressure, which in turn, will impact their profitability. If it’s increased marginally, the price hike will have a negative impact on both pricing and margins. 

What It Means For Customers

In the event of a price hike by insurers, the companies would need to raise premium costs between 20 and 40 per cent. This would imply a big jump in cost for the average consumers planning to buy an insurance plan. Also, there’s another long-term impact to this. Even if the economy revives, and market comes back to normalcy, people will still have to continue to pay for the increased premium structure until policy maturity, i.e., minimum 25-30 years. And one cannot wait for the market prices to be reduced, as that would increase risk to a great extent. 

However, staying without an insurance plan for a year or two is also not a desirable option. Irrespective of the premium, one would have to continue to buy insurance plans for one’s safety and security.