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MOSL: INDIA HEALTH INSURANCE: Third COVID wave to drive premium growth if it manifests, but will impact claims

INDIA HEALTH INSURANCE: Third COVID wave to drive premium growth if it manifests, but will impact claims

 

With a new COVID-19 variant emerging in many countries, there are expectations about a third wave in India as well. In this report, we highlight the impact of the first two waves on premium growth, claims frequency, and claims severity for Health insurers in India. 

• Health Insurance in India is highly underpenetrated, with less than 4% of the population having a retail health cover. The pandemic helped increase awareness of buying a medical cover, which translated in a 28%/18% YoY growth in retail Health Insurance in FY21/1HFY22.
• In Apr’20 (after the COVID-induced nationwide lockdown), growth in Health Insurance was muted at 5.7%. While demand was strong during this phase, the challenge in distribution, owing to the lockdown and limited preparedness of insurers to conduct business online at such a large scale, restricted growth. During the second COVID wave, growth was strong (up 18% YoY) in 7MFY22.
• The frequency of claims surged during the second wave, with COVID-related claims during Apr-Aug’21 at 1.4m v/s 1m in FY21, an increase of 44%. The severity of claims declined by 24% during the same phase to INR112,366. The key reason for the fall in severity was the preparedness of hospitals, established cost of treatment, discovery of the line of treatment, and rollout of vaccination.
• In case of a third COVID wave, we believe a sizeable chunk of India’s population would be vaccinated with both doses (currently ~32% of the population has received both doses) and preparedness of hospitals and the government administration will be much better, thus reducing its severity.
• At present, ~8.3m doses are being administered daily, of which 2.6m/5.7m are for the first/second dose. At this pace, almost 80% of the population will be vaccinated with both doses in the next 3-4 months.