Page 15 - Insurance Times August 2021

The data reveal that of the average in the profits of company in the form increased twice in the last 20 months
claim amount of Rs. 1.33 lakh, as much of bonus. owing to reinsurance pressures.
as Rs. 95,512 is settled through The eligible participating policyholders As per estimates shared by industry
insurance. will get a share of the surplus sources, India's life insurers settled
Earlier, out-of-pocket expenses were generated in the participating fund around 25,000 death claims worth
higher, and could be to the tune of and their benefit amount will increase around Rs. 1,500 crore in the first
about 40-45 per cent. Insurers say that with declaration of bonuses every year, quarter of FY22, just on account of
there are various factors that lead to HDFC Life said in a statement. coronavirus. This is more han what life
out-of-pocket expenses for customers It exceeds the previous year's bonus by insurers had settled in the first 12
during Covid treatment. However, it 44 per cent. A total of 15.49 lakh months of the pandemic over FY21.
has come down significantly due to policyholders are eligible for this bonus,
lower costs of consumables and it said. $1.4-bn gain for investor
standardised treatment protocols. Out of the total amount, Rs 1,438 crore Fairfax
"Disallowances are around four main will be payable to policies in this financial Prem Watsa, founder of Fairfax group,
buckets. The first one is when the year as bonus on maturing policies or as has struck a goldmine in his investment
product runs out sum insured," said cash bonuses, said the insurer. in Go Digit General Insurance Ltd.
Rajagopal Rudraraju, Senior Vice- The remaining bonus amount would be Fairfax Financial Holdings has made a
President and National Head, Accident payable in the future when policies exit $1.4-billion (around Rs 10,000 crore)
and Health Claims, at Tata AIG General on maturity, death or surrender. gain after Digit launched a $200-million
Insurance. share sale at a valuation well above
HDFC Life MD and CEO Vibha Padalkar
According to him, one of the biggest said the company remains committed Fairfax's investment in the four-year-
reasons for out-of pocket expenses by to its policyholders in delivering the old company.
customers is that the amount of best in terms of products and services. Watsa's investment in this
treatment exceeds the sum insured. comparatively small insurance firm has
"The insurer cannot do anything in such Life insurers seek a fix on appreciated by ten times in a period of
a case. In normal claims, this issue of third wave impact four years, making it one of the fastest
sum insured running out comes up less appreciations in the insurance sector.
frequently, but is more common in India's life insurance sector is assessing Since Digit was founded in 2017,
Covid-related health claims," he noted. possibilities of increasing Covid-19
specific provisions in FY22 to protect Toronto-based Fairfax has invested
The cost of consumables such as PPE solvency margins in the event of a approximately $154 million in the
kits and gloves has also come down, likely third wave as the impact of the former. That investment is currently
but depending on the insurance cover second incidence exceeded their risk carried on Fairfax's balance sheet at
it can add to the out-of-pocket model estimates. $532 million and, when the new equity
expenses. "During the peak of the A sudden spurt in Covid-19 cases in issuances by Digit close and the Indian
pandemic last year, it was up to 13 per government and regulatory approvals
countries such Israel and the United
cent to 15 per cent of the bill. Now, it Kingdom, being seen by experts as a are given, will have an aggregate
is eight per cent to seven per cent of beginning of a possible global third market value of approximately $2.3
the bill," he said. wave, has created uncertainties billion, Fairfax said.
among insurers on the extent of Fairfax had recently acquired a
Rs. 2,180 crore bonus for provisions to be made for a sudden majority stake in CSB Bank.
some policyholders: HDFC increase in claims burden as seen Digit - which boasts of cricketer Virat
during the second wave between April Kohli as an investor - said it was raising
life and June, according to industry money by selling stock to a group of
HDFC Life announced a bonus of Rs insiders. institutional investors that includes
2,180 crore to its policyholders Some sections of the insurance industry Faering Capital, Sequoia Capital India
subscribing to participating insurance
also believe that the third wave of and IIFL Alternate Asset Managers.
plans. infections in India could also lead to a The latest financing values Digit
Under a participating plan, a new round of price hikes for term Insurance at $3.5-billion (Rs 25,900
policyholder is eligible to get a share premiums which have already been crore). T

The Insurance Times, August 2021 15