Corona Kavach, Rakshak policies: items that cause a loss

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Policies of insurance Corona Kavach and Corona Rakshak have proven to be loss-making products for the majority of insurers, forcing them to seek a re-pricing from the regulator as large claims payouts cut into their earnings. Corona Kavach and Corona Rakshak have turned out to be losses for the majority of insurers. They all released these goods in July (last year).

“On Corona Raksha and Corona Kavach plans, they are substantially under-priced,” a top executive from a general insurance firm told PTI on the condition of anonymity. According to statistics accessible till June of this year, the official stated that when comparing the peak of the pandemic in other countries and India, the country’s peak was greater.

“Our second peak was twice as high as our first, and it was higher than any other country on the planet. And I would be astonished if any of the insurer’s profit from this product,” added the official. According to the source, the majority of insurers and reinsurers have urged the Insurance Regulatory and Development Authority of India (Irdai) to re-price these two products.

However, the official stated that it would be difficult to speculate on the type of price revision they are asking because it varies from business to company. Another industry insider stated, “From what I gather, Corona Rakshak and Corona Kavach are loss-making plans for insurers.”

The government-owned insurers are projected to post significant underwriting losses of Rs 12,400 crore to Rs 13,500 crore in the current fiscal year, owing to a likely high claims ratio on the health and auto portfolios. “Since the outbreak of the pandemic, non-life insurers have settled media claims worth Rs 24,000 crore,” Ankit Agrawal, founder, and CEO of InsuranceDekho said.

Following the outbreak of the pandemic last year, Irdai developed these two COVID-19-specific solutions to satisfy the financial protection needs associated with the costs of COVID-19 treatment. Corona Kavach is a standard indemnity-based health insurance policy, whereas Corona Rakshak is a typical benefit-based health insurance policy.

On or before July 10, 2020, all general and health insurance were required to offer Corona Kavach. While all insurers (general, health, and life) were instructed to launch the Corona Rakshak insurance by the same deadline.

Corona Kavach offers sums insured starting from Rs 50,000 to Rs 5 lakh (in the multiples of Rs 50,000). Corona Rakshak offers sums covered ranging from Rs 50,000 to Rs 2.5 lakh (multiples of Rs 50,000). Both plans are available in three policy durations: three and a half months, six and a half months, and nine and a half months.

These two items do not provide lifelong renewability, migration, or portability. These are available to those between the ages of 18 and 65. Due to the limited length of these plans, insurers advise policyholders to obtain complete health coverage, according to the first official quoted above.

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