Reply To: Impact on Insurance Sector post lockdown
Rishabh Surana
I do think there will growth in insurance sector in India but I think it will be much of a linear growth and not exponential ( or a boom ). As for individual companies they are being pushed back because of unexpected losses.
Yes, one of the issue which might cause an hurdle for growth of Insurance company might be unexpected no. of claims.
But there are many factors apart from this which might affect an Insurance Co.; few of them are as follows:
1) Reduce in interest rate have increased the amount of reserves that the co’s need to hold
2) Due to lockdown, every sector is affected & seeing the past trend Insurance is not a primary need/choice for the people in India & also their savings will also have decreased; so it will take time for penetration to increase. Due to lockdown, the poverty rate of India will also increase.
3)Also, there is a complete mismatch of Assets & Liabilities due to Covid’19 & recent bond default by major companies. So there are chances that insurance companies have to increase premium rate.
4) Also, there will be a substantial job loss.
Even the financial sector will see reduced valuation and major NPAs.This will cause major re-rating of commercial paper.
5) The sale of Insurance policies may increase but linearly & not expotentially.
Also, due to increase claims companies might not be affected much because most of the person who are dying due to Covid’19 are elderly & the premium would have been charged accordingly.