Effect of COVID-19 pandemic on insurance industry

As you are aware that with the advancement of technology, our standard of life has been improved. We have developed a lot on technological front ,which help us to spend our life with ease and hassle-free. The modern technologies have provided us everything which will provide us comfort and advantage. Our wealth and earnings have been increased as well as our greed. The greed in human being is the most dangerous habit developed in recent time. The people never satisfied with what they have and try to earn more and more comfort and materialistic things. The developed countries are in process of exploiting more and more resources from developed country and they are using all tactics to capture markets for their products all over the world. Many countries taking trade as war and they are doing all things to keep their market intact. They even using destructive forces by killing people of other countries to capture and sale of their products. They sometimes use biological weapons on the people of other countries to sale their pharmaceuticals products.

The COVID-19 virus is also one of the biological weapons used by Chine to destabilise whole world and promote of its products . This virus has been made in Wuhan State Laboratory of China and spread all over the world claiming lives of more than sixty-three millions of people.

Coronaviridae is a family of viruses with a positive-sense RNA that possess an outer viral coat. When looked at with the help of an electron microscope, there appears to be a unique corona around it. This family of viruses mainly cause respiratory diseases in humans, in the forms of common cold or pneumonia as well as respiratory infections.

The International Committee on Taxonomy of Viruses (ICTV) announced " Severe Acute Respiratory Syndrome Coronavirus 2 ( SARS-Cov-2) and the name of the new virus on 11^th Feb, 2020. This name is chosen because the virus is genetically related to the " Coronavirus" responsible for "SARS" outbreak in year 2003. The SARS virus has affected Asia reason the most and has taken thousand of lives. The WHO to avoid fear in people called new virus as "Virus responsible for COVId-19" or " the COVID-19 Virus."

As we know that "COVID-19" is disease caused by "Severe Acute Respiratory Syndrome Coronavirus 2" and hence new virus called as "COVID-19".

On December 31, 2019, mysterious cases of pneumonia were detected in the city of Wuhan in China's Hubei Province. On January 7, 2020, the causative agent was identified as a new coronavirus (2019-nCoV), and the disease was later named as COVID-19 by the WHO.

The virus spread extensively in the Wuhan region of China and has gained entry to over 210 countries and territories. Though experts suspected that the virus is transmitted from animals to humans, there are mixed reports on the origin of the virus. There are no treatment options available for the virus as such, limited to the use of anti-HIV drugs and/or other antivirals such as Remdesivir and Galidesivir. For the containment of the virus, it is recommended to quarantine the infected and to follow good hygiene practices. The virus has had a significant socio-economic impact globally. Economically, China is likely to experience a greater setback than other countries from the pandemic due to added trade war pressure, which have been discussed in this paper.

When the spread of COVID-19 began , the virus appeared to be contained within China and the cruise ship "Diamond Princess," which formed the major clusters of the virus. However, as of April 2020, over 210 countries and territories are affected by the virus, with Europe, the USA, and Iran forming the new cluster of the virus. India and China are also badly affected by this virus but to some extent effective COVID-19 management steps taken by the governments of both countries huge causalities not happened.

The Government of India effectively taken all measure steps to stop spread of this pandemic. The government with the help of all states announced total lockdown in steps. On the other hand, the GOI was working with the pharmaceutical's companies for preparation of vaccine for COVID-19 virus. We have developed our two own COVID-19 vaccines in the early state of pandemic and with the effort of the government today all 130 million population of India have been vaccinated.

The COVID-19 pandemic effected the European Countries , USA, South America, Africa , Australia even remotely situated countries. The whole health infrastructure of the World collapsed. The governments had imposed lock down all over the world. The business houses, hotels, resturamts, officers, bars, retail outlets etc. had been closed to save people and to stop spreading of COVID-19.

LET'S CONSIDER STATEWISE CHART OF PERSON EFFECTED BY COVID-19

State-wise covid-19 data: India (April 28, 2022)

Source: Ministry of Health and Family Welfare, Government of India

There are 5.24 Lakhs causalities till date as compared to all over the world i.e., 62.30 Lakhs deaths .

EFFECT OF COVID-19 PANDEMIC

COVID-19 has rapidly affected our day-to-day life, businesses, disrupted the world trade and movements. Identification of the disease at an early stage is vital to control the spread of the virus because it very rapidly spreads from person to person. Most of the countries have slowed down their manufacturing of the products. The various industries and sectors are affected by the cause of this disease; these include the pharmaceuticals industry, solar power sector, tourism, Information, and electronics industry. This virus creates significant knock-on effects on the daily life of citizens, as well as about the global economy.

Presently the impacts of COVID-19 in daily life are extensive and have far reaching consequences. These can be divided into various categories:

1. Healthcare

• Challenges in the diagnosis, quarantine, and treatment of suspected or confirmed cases
• High burden of the functioning of the existing medical system
• Patients with other disease and health problems are getting neglected
• Overload on doctors and other healthcare professionals, who are at a very high risk
• Overloading of medical shops
• Requirement for high protection
• Disruption of medical supply chain

2. Economic

• Slowing of the manufacturing of essential goods
• Disrupt the supply chain of products
• Losses in national and international business
• Poor cash flow in the market
• Significant slowing down in the revenue growth

3. Social

• Service sector is not being able to provide their proper service
• Cancellation or postponement of large-scale sports and tournaments
• Avoiding the national and international travelling and cancellation of services
• Disruption of celebration of cultural, religious, and festive events
• Undue stress among the population
• Social distancing with our peers and family members
• Closure of the hotels, restaurants, and religious places
• Closure of places for entertainment such as movie and play theatres, sports clubs, gymnasiums, swimming pools, and so on.
• Postponement of examinations.

This COVID-19 has affected the sources of supply and effects the global economy. There are restrictions of travelling from one country to another country. During travelling, numbers of cases are identified positive when tested, especially when they are taking international visits. All governments, health organisations and other authorities are continuously focussing on identifying the cases affected by the COVID-19. Healthcare professional face lot of difficulties in maintaining the quality of healthcare in these days.

LET'S CONSIDER EFFECT OF COVID-19 PANDEMIC ON THE INSURANCE SECTOR

As we are aware that insurance is a promise given by insurance company in lieu of small consideration called premium paid by the insured to financially protect the insured against happening of insured perils. Insurance Policy is a contract between Policyholder and the Insurance Company. India's insurance penetration was pegged at 4.2% in FY21, with life insurance penetration at 3.2% and non-life insurance penetration at 1.0%. In terms of insurance density, India's overall density stood at US$ 78 in FY21.

COVID-19 has transformed many sectors in India and the health insurance sector is one of them. Certain positive changes and some challenges have occurred in the health insurance industry over the past few years. These changes have been brought in by the insurance providers to adjust to the new norms of COVID-19 pandemic, and to continue delivering their services without any hassles for the customers. COVID-19 specific health insurance plans have been included in the regular health insurance plans by the insurers for the policyholders.

Health insurance sector has been digitalized entirely for the purchase and renewal of the health insurance policies using the official website of the insurer. The sale of health insurance plans has increased dramatically over the last few years as people have come to realise the importance of financial backup for medical emergencies. Even in the times of economic burden on the industries, the health insurance sector has made its way. 

THE INSURANCE INDUSTRY HAS PERFORMED REMARKABLY DURING COVID-19 PANDEMIC

1. The life insurance industry is expected to increase at a CAGR of 5.3% between 2019 and 2023. India's insurance penetration was pegged at 4.2% in FY21, with life insurance penetration at 3.2% and non-life insurance penetration at 1.0%. In terms of insurance density, India's overall density stood at US$ 78 in FY21.
2. Premiums from India's life insurance industry is expected to reach Rs. Twenty-four lakh crore (US$ 317.98 billion) by FY31.
3. In the first half of FY22, the life insurance industry recorded growth rate of 5.8% compared with 0.8% in the same period last year.
4. The gross first year premium of Life insurers increased by 6.94% in 2021-22 (until January 2022) to Rs. 2,27,188 crore (US$ 29.54 billion).
5. Between April 2021 and January 2022, gross premiums written off by non-life insurers reached Rs. 227,188.89 crore (US$ 21.24 billion), an increase of 6.94% over the same period in FY21. In January 2022, total premium earned by the non-life insurance segment stood at Rs. 21,957.03 crore (US$ 2.85 billion), as compared to the Rs. 21389.70 crore (US$ 2.77 billion) recorded in January 2021.
6. The market share of private sector companies in the general and health insurance market increased from 48.03% in FY20 to 49.31% in FY21.
7. Premiums from new businesses of life insurance firms in India totalled US$ 81.7 billion in FY21, representing a 2.8% increase over FY20.
8. Six standalone private sector health insurance companies registered a jump of 66.6% in their gross premium at Rs 1,406.64 crore (US$ 191.84 million) in May 2021, as against Rs. 844.13 crore (US$ 115.12 million) earlier.
9. In March 2021, health insurance companies in the non-life insurance sector increased by 41%, driven by rising demand for health insurance products amid COVID-19 surge.
10. In July 2021, non-life insurers' premium, which include general, standalone, and specialised public-sector, recorded 19.46% YoY growth and reached Rs. 20,171.15 crore (US$ 2.71 billion) against Rs. 16,885 crore (US$ 2.27 billion) in the same month last year.

According to S&P Global Market Intelligence data, India is the second-largest insurance technology market in Asia-Pacific, accounting for 35% of the US$ 3.66 billion insurtech-focused venture investments made in the country.

Coronavirus did what no amount of advertisement by life insurers could do. It pushed life insurance penetration in India from 2.82% in 2019 to 3.2% in 2020 (the year Covid hit) which is close to the global average.

Thanks to the coronavirus pandemic, many more Indians purchased life insurance policies. According to the Economic Survey 2021-2022, life insurance penetration rose to 3.2% in the year 2020.

Insurance penetration is measured as the percentage of total life insurance premium paid in a year to GDP. Insurance density is calculated as the ratio of premium to population (measured in US$ for convenience of international comparison).

The last time the penetration of life insurance was at this level was in 2011 at 3.4%. After 2011, life insurance penetration had gradually declined over the years and even reached its lowest level in a decade in 2014 at 2.62%. Since then, it saw a marginal improvement and reached 2.82% in 2019.

When it comes to overall insurance penetration which includes both life and non-life insurance in India, the insurance penetration was 2.71% in 2001 and has steadily increased to 4.2% in 2020. As of 2020, the penetration of non-life insurance penetration was 1%. While India has now reached close to the international average in terms of insurance penetration for life insurance, we lag behind in terms of non-life insurance.

Globally, insurance penetration was 3.3% for the life segment and 4.1% for for the non-life segment in 2020.

As far as population density in India is concerned it increased from $11.5 in 2001 to $78 in 2020. In 2020, density for life insurance in India is $59 and non-Life insurance is $19, much lower than global standards. Globally, insurance density was $360 for the life segment and $449 for the non-life segment respectively in 2020.

The significant rise in purchase of life insurance by Indians in 2020 can also be gauged by the fact that 44.3% of total premium collected by life insurers in 2020 was from new policies. "During 2020-21, the gross direct premium (within and outside India) of Non-Life insurers was Rs 2,02,082 crore, as against Rs 1,92,193 crore in 2019-20, registering a growth of 5.2 per cent.

Motor and health segments contributed a significant portion of the growth. Life insurance industry recorded a premium income of Rs 6,28,731 crore during 2020-21, as against Rs 5,72,910 crore in the previous financial year, registering a growth of 9.74 per cent. While renewal premium accounted for 55.7 per cent of the total premium received by the life insurers, new business contributed the remaining 44.3 per cent," stated the survey.(Source: Economicstimes.indiatimes.com)

Below mentioned chart shows Insurance Density in India

CONCLUSION  

The COVID-19 pandemic effected Indian Insurance Industry positively. The Pandemic has created awareness among common Indians and they realise the importance of insurance at least health insurance in their lives. Millions of new customers have been added which increased GWP of insurance company on the other hand claims against COVID-19 causalities have also increased. This was a hard time for insured as well as insurance companies. The regulator in this case has done recommendable job by strict application of directions given by the government. We have came out of this pandemic with consolidated efforts of our governments, regulator, health workers and our pharma companies, who dared to produce Indian Make Vaccine for COVID-19. Our vaccines are at par with the world and we have also exported the same in various parts of India.

It is expected that Life Insurance in India will increase at the rate of 14-15% annually for next five years. There are many changes done by the government as well as regulator ( IRDAI) in rules and regulations governing insurance sector. The FDI limit has been increased from 49% to 74% and in case of insurance intermediaries to 100%. The private insurers are expected to grow their APE at CAGR of over 17% between 2021-23 and new retail term premium are expected to double in next five years. The forecasted growth in non-life insurers will be 16%-17% in FY 2022-23.

DISCLAIMER: The article produced here is for sharing information and knowledge to the readers. The views expressed here are the personal views of the author and same should not be taken as professional or legal advice. The article has been prepared on the basis of available information on various forums at the time of preparation. The author has taken all steps to share true and correct information to the readers. In case of necessity do consult with legal consultants.