India’s regulator praised for proactive approach to tackling COVID-19 challenges

As the COVID-19 pandemic rages on, the solvency of many companies in India is under pressure, but the regulator has not stood idle, according to PK Bhagat, principal officer and head reinsurance, GramCover Insurance Brokers.

Bhagat, who formerly served as general manager of GIC Re, was speaking during a panel discussion held on Intelligent Insurer’s Re/insurance Lounge, an online platform where interviews and panel discussions are held live on a weekly basis and content is available on demand at any time to members.

The session, called “Asia’s changing reinsurance landscape: a panel debate in lieu of SIRC”, also featured Eunice Tan, senior director and sector lead, Asia-Pacific insurance ratings, S&P Global Ratings.

“The major concern is that solvency is under pressure for most companies, especially insurance companies. Even some of the big re/insurers’ solvency is on the edge at the moment. I hope things will improve because all these companies are geared up to meet the challenge,” said Bhagat.

However, he added, India’s insurance regulator, the Insurance Regulatory and Development Authority (IRDAI), has been very active since the beginning of the pandemic. In recent months, this includes the formation of a study group to examine whether a pandemic risk pool can be formed in India, with GIC as manager of the pool.

Earlier this year, the IRDAI permitted insurers to submit their final reinsurance plans for financial year 2020–21 with a delay as the country grappled with lockdown. The IRDAI also issued guidelines for insurers on the handling of claims reported under COVID-19. And, more recently, the regulator has instructed insurers to provide short-term health insurance plans in the country.

Alternatives and underwriting discipline
For auto insurers, the pandemic has been a boon, for this year at least. Sparse traffic on the roads is leading to fewer accidents which, in turn, leads to fewer claims. However, the lull in economic activity as a result of the prolonged lockdown has hit small and medium-sized enterprises hard.

“Even big business is not back to pre-COVID-19 levels and automobile sales have suffered,” says Bhagat. “Quite a few direct insurance companies depend largely on automobile insurance. They had to look at alternatives, and many of them have switched over to health insurance.

“They seized the opportunity by revising cover and selling aggressively.”

Bhagat added that crop insurance, which GramCover specialises in, has not been at the same level as it was last year, but despite these challenges, there are opportunities in India, particularly for cyber and health cover.

He expects rising demand for health insurance, alongside an upward movement of prices next year for the line. Premiums have gone up by more than 30% this year for health insurance, according to Bhagat.

The former GIC Re executive is seeing the growing importance of technical underwriting and underwriting discipline in India, particularly given the interest rate environment.

On crop insurance, GIC had previously given support to insurance companies. But this year, GIC decided not to reinsure more than 45% of any insurer’s crop business.

Bhagat added: “The scenario has changed. With the kind of investment climate in the country now, you cannot expect the same amount of return this year. GIC has been very strict since the latest renewals and I hope this trend will continue for the years to come.”

To watch the full video interview on which this write-up is based, click here and visit Intelligent Insurer’s Re/insurance Lounge