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Insurance Regulatory and Development Authority has allowed two covid-19 policies—Corona Kavach and Corona Rakshak. Photo: iStock
Insurance Regulatory and Development Authority has allowed two covid-19 policies—Corona Kavach and Corona Rakshak. Photo: iStock

Reinsurance firms reluctant to cover covid-only plans

If the frequency assumption on number of people who fall sick goes wrong, reinsurers could lose a lot of money

MUMBAI : The absence of the reinsurance option for covid 19 policies has been a challenge for the insurance industry, said representatives of both life and health insurers during the Pivot or Perish online insurance meet organized by Mint on Thursday.

Prasun Sikdar, managing director and chief executive officer, Manipal Cigna Health Insurance Co. Ltd, said indemnity covers do not present a huge reinsurance need since most corona patients are asymptomatic or have mild symptoms. But a benefit-based corona policy will need reinsurance due to the uncertainty about the diagnosis rate.

Bhargav Dasgupta, managing director and chief executive officer, ICICI Lombard General Insurance, also emphasized on the need for reinsurance in benefit-based policies, such as Corona Rakshak, due to the higher possibility of fraud.

The Insurance Regulatory and Development Authority has allowed two covid-19 policies—Corona Kavach and Corona Rakshak. Corona Kavach is an indemnity product, wherein a patient is reimbursed the actual cost of treatment, and non-life firms are mandated to offer the product.

Corona Rakshak, however, is a benefit-based policy wherein the patient is offered a fixed amount on being hospitalized for 72 hours for covid-19. For such policies, the full amount has to be paid if the beneficiary is diagnosed with covid-19.

“If your frequency assumption on the number of people who fall sick goes wrong, you could end up losing a lot of money and for that you need reinsurance," said Dasgupta, adding that while insurers were mandated to launch the corona policies, there has been no compulsion on reinsurers to provide cover.

This has led to a wide variance in premiums as companies are modelling the risks differently, and smaller insurers are being compelled to quote higher premiums as the risks are higher, Dasgupta added.

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