COVID-19: Insurance companies make waiting period mandatory for life insurance policies

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COVID-19: Insurance companies make waiting period mandatory for life insurance policies

People who have recovered from an infection will have to wait for up to three months before they can take a new life policy, with insurers making the waiting period requirement applicable for cases like other ailments.

As a standard practice, all life and health companies require people to wait for a certain period with respect to certain ailments and diseases to gauge the risk before selling a policy.

The waiting period for people who have recovered from infection will only apply for life policies.

Industry experts said that the waiting period for individuals who have recovered from coronaviruses was in place to take a new insurance policy because of the high mortality rate related to coronaviruses.

Insurance companies have been asked by insurers to bring coronaviruses infections cases under the standard waiting period norms because high mortality rates have a significant impact on the reinsurance business. The waiting period is about one to three months, they added.

Reinsurance players provide the cover for issued by insurers.

Sumit Bohra, President of the Insurance Brokers Association of India IBAI, said Indian insurers don't have the capacity to write all these risks. Most of the above Rs 10 -- 20 lakh are reinsured, and the reinsurers want good risk to come into the system, which has made the waiting period applicable for coronaviruses infection cases, he noted.

This is a requirement that has been raised by the reinsurance companies because of the two years that the life insurance companies have had in the past two years and the kind of experience that the industry has seen in terms of claims. Karthik Raman, Product Head of Ageas Federal Life, said that the rule had to come into force with immediate effect.

Raman said insurance companies already have the waiting period for various other ailments and that the coronaviruses infection is one more ailment added to that list.

It is a standard practice to have a waiting period. It is not just our country, it is worldwide and COVID comes under this practice, he said.

Bohra said that the coronaviruses infection has also been included in the list of ailments where the waiting period will be applicable because the mortality rate is high due to the infection.

The mortality rate was less than before and there was acceptance for more risk. If the mortality rate is going to be high, an amount of premium is not good enough to pay the claims. It is not like a cold or flu with COVID.

It is also damaging other organs of the body, particularly the lungs. Bohra said it is difficult to gauge the survival rate if a policy is being issued for a longer period of time.

Yogesh Agarwal, Founder and CEO of Onsurity, said in our understanding, insurers have asked for a one month waiting period. It is part of a risk management strategy because of what had happened during the second COVID wave Term life insurance products that are not only driven by the insurers but by the reinsurers as well as in the ecosystem.

Since the COVID pandemic, reinsurers have not been able to do good business, he said.

Agarwal said the waiting period for people who have recovered from a coronaviruses will only apply on life insurance policies, and not health. It will not affect existing policyholders and new retail customers in any way.

The country's largest life insurer LIC gave a reinsurance premium of Rs 442 crore during the 2020 -- 21 fiscal year, up from Rs 327 crore in the previous fiscal. Private sector players gave a premium of Rs 3,909 crore as a premium for reinsurance, up from Rs 3,074 crore in the previous financial year.