Life insurers fear a loss in Q1 due to Covid, increasing provisions

Chennai: Life insurance companies increased their provisions in the first quarter following higher-than-expected Covid-related claims, which will affect results and cause a loss for some. The average number of Covid death claims in FY22 has so far increased 1.5 to 2 times, compared to FY21 as a whole, analysts say.
Kotak Life has informed its parent bank that it has built up a higher provision due to increased claims and a larger provision for mortality-related deaths in Wave 2. He expects to incur a loss of around Rs 225-Rs 275 crore on the shareholder’s account. These are net reinsurance losses.
Canara HSBC OBC Life Insurance says it may need to allocate significantly more provision – which could be more than double – than last year. It is a joint venture of Canara Bank, HSBC Insurance Holdings and Punjab National Bank. Its Managing Director and CEO Anuj Mathur said, “We have seen a 5-6-fold increase in claims in the last two months of April and May, and the trend continues in June as well. Deaths from Covid claims may not be significant this year. However, claims of post-Covid deaths due to long-term effects like a heart attack are on the rise. The average size of his claims remains unchanged at Rs 10 lakh.
Nitin Aggarwal, Vice President of Financial Services at Motilal Oswal (Research and Banking Sector, Institutional Equities), said: “Many insurers have already set aside provisions in FY21, while others, such as Kotak Life, take provisions in the first quarter of fiscal year 22 ”. He added that Max Life made the highest provisions of around Rs 500 crore, he reported fourth quarter sales later than others and had time to make those provisions.
Max Life Insurance paid 19,922 claims worth Rs 886 crore in FY21, making it the company’s highest paid individual claims ratio at 99.4% in FY21 , compared to 99.2% in FY20 and 98.7% in FY19.
ICICI Pru Life has made an additional provision of Rs 333 crore towards Covid, which is not used so far. He settled the total Covid claims of Rs 459 crore for FY21. HDFC Life has provided around Rs 165 crore to its Covid reserve for FY22.
In his presentation to investors, he said the provision was made based on his actual experience in FY21 and after taking into account aspects such as the latest mortality trends in business segments. and customer base and the geographic spread of Covid 2.0. And it will continue to review the adequacy of this reserve in FY22.