Pandemic may cut life policy cover

(This story originally appeared in on Apr 28, 2021)

CHENNAI: Life insurance companies have turned cautious and tightened underwriting norms for high-value policies in the wake of the Covid pandemic and pullback by reinsurance companies citing low rates in India.

Obtaining a cover is particularly challenging for those who have recently recovered from Covid as the company requires further screening. A year ago, a 35-year-old could purchase a Rs 1-crore term cover after a telemedical check-up. However, if he had contracted Covid, he would have had to undergo a battery of tests.

A Mumbai-based doctor told TOI that a Rs 3.5-crore cover on

’s Click2Protect, for which he received a quote, was downsized to Rs 1 crore. What shocked him was a WhatsApp message from the company’s employee stating, “Considering the overall profile of your — profession and medical history — rate has been revised a bit. Your sum assured has been revised to Rs 1 crore.” According to the doctor, the message was that they were wary of Covid frontliners.

HDFC Life MD & CEO Vibha Padalkar, however, said that the revised quote had nothing to do with the profession. “We are in the business of covering lives and we have no reason to say no to anybody unless the risk profile of the individual is not covered by the reinsurer. The reason for not giving Rs 3.5 crore is not because of Covid, but on the grounds of financial underwriting norms.”

Where the applicant stays, their background and access to healthcare for post-Covid recovery are some of the factors evaluated currently, according to HDFC Life. The situation in life insurance is similar to health where insurers are cautious in terms of accepting proposals from those who have recently recovered from Covid and impose a waiting period or exclusions.

What made things difficult for the doctor, who contracted Covid in August, was that he wanted to buy a policy before he turned 35 to avoid falling into a higher rate bucket. However, the delays in appraisal caused him to miss the nearest birthday deadline.

Pointing out that HDFC Life has issued 1,700 policies worth Rs 2,000 crore to doctors last year, Padalkar said that the company’s stance on all risk parameters is dynamic and that what applied in the first wave of Covid is not relevant now and a lot would depend on how the pandemic is managed. She added that a lot of the term insurance business is heavily dependent on reinsurance support.

Speaking on life insurers turning cautious in underwriting cover, insurance aggregator Policybazaar’s head of term life Insurance, Sajja Praveen Chowdary, said, “Any medical condition of applicants in the recent past is looked upon by the underwriter slightly in-depth as a regular process. They might ask you for additional medical tests or physical medical tests. At times, they may postpone your cover for three or six months, in which case one has to reapply.”

According to a CEO of a private life company, the pullback from reinsurers had started even before the pandemic. Covid only made it worse. What triggered it was intense competition in India, which resulted in term insurance rates falling to even below what is charged in Europe. This, despite Europe having better healthcare and mortality rate among the insured population.

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