How covid-19 will change the way insurance policies are bought and sold

For me, a benefit of the lockdown has been working from home. Fellow introverts know the connection we have with the mute button on Zoom and the supreme satisfaction of clicking “Stop video”. This lockdown has changed the way we work and I will find it difficult to get back to a typical office day from the pre-covid-19 era.
The insurance business, however, appears to be relatively less impacted than most industries but it is becoming clear that conventional and traditional ways of working in insurance must change. Insurance transactions are overwhelmingly contact-based and face-to-face. The agent or bank executive sits across the table walking you through proposal forms, illustrations and options. Many forms need to be physically signed. Some service requests like surrendering insurance may require a visit to the branch. Third-party administrators will often visit you in hospital to verify a claim. Bills for reimbursement must be sent for processing, in original. Surveyors must physically inspect property damage before a claim is admitted. Grievance redressal with the ombudsman or courts requires a physical hearing. These contact-intensive processes are difficult to continue now.

The most material change has to be in the insurance products. The question that I have been asked frequently, in health insurance, is if existing plans cover coronavirus treatment costs. They do. Over the years, the basic mediclaim insurance has been made comprehensive, through competition and regulatory interventions. Exclusions have been removed, wellness and outpatient benefits introduced, and waiting periods reduced. It is best to buy these comprehensive mediclaim insurance policies rather than specific covers for ailments such as dengue, cancer or viruses because we just do not know which ailments are lurking.

Life insurance policies will also need to change because unit-linked insurance plans (Ulips) and traditional life insurance policies can be complex and difficult to explain online or over the phone. These policies will need to be simplified. Pre-issuance medical tests across insurances will get more difficult to conduct and insurance policies will have to be redesigned for more non-medical issuance. Home and property insurance policies will also undergo a change. Currently, many of these policies have a clause that requires the property to not be unoccupied for over 30 days. Newer contracts should waive this requirement in case of force majeure situations like the coronavirus.

A large proportion of insurance sales are through an agent or salesperson visiting your home or office. This will reduce because of social distancing norms. Perhaps advertisements of happy families with an insurance adviser may be replaced with the same family surfing the internet for insurance information or speaking to an adviser on the telephone. This is a big change that is best explained with the mandatory sales illustration. The illustration has cash flow projections under different investment scenarios. This key document to understand your life insurance is hard to read on a phone. Insurance buyers are accustomed to frequent home visits by the agent and will need to be weaned to other forms of sale.

A few servicing requests, such as surrenders or getting a duplicate policy copy, require visits to the insurers’ branch. In the interest of policyholders, these processes will need to be modified. Property and motor insurance claims need a surveyor to physically verify the damage before a claim is admitted. Now, at least for smaller claims, picture- or video-based solutions will be required. The ombudsman and consumer courts will need to prepare for remote hearings. For the past few weeks, we have been trying to determine the status of a case logged with an ombudsman but there has been no response because of the lockdown.

Insurers have yet to know the claims impact of the coronavirus. Covid-19-related claims are increasing steadily but there are large differences in hospital charges. The ultimate incidence rate is also hard to determine at this time. Surprisingly, cases of medical emergencies have fallen steeply. A drop due to motor accidents is understandable but heart attacks and strokes have also reduced. Is this because of lifestyle changes or just an aversion to visiting the hospital? This could be a longer-term change or a temporary reduction. Be prepared for more frequent price and policy term changes as insurers grapple with the economic impact of the pandemic. Over the past month, we have seen several group-based covid-19 insurance policies introduced and then modified as claims have developed.

Ultimately, when things settle down, we will have a more efficient, policyholder-oriented industry. In this contact-less world then there is one inefficiency that I will miss—walking out of office, with little regard to productivity, to have a hot cup of chai.

Kapil Mehta is co-founder of SecureNow – Livemint

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