Covid-19 Lockdown: Impact on Insurance sector

R Basil

Q. How do you see the insurance sector during the pandemic?

A: Insurance is one of the important sectors for a well-functioning economy. The Indian insurance sector has seen secular growth over the years, driven by increasing incomes and awareness about having the right insurance coverage. This is true for both life and general Insurance. Although growth has been strong, penetration is still low; hence, there is scope for continued growth over the foreseeable future. The current pandemic and ensuing lockdown have impacted most economic activities, and Insurance is no different. We have seen that premium growth for both life and general insurers has been impacted, given that policyholders have been allowed extensions in terms of premium payments due to the lockdown. In our view, this has resulted in the postponement of premium collection for existing and new business. Most of this impact will be reversed once the economy opens for regular business after the lockdown is lifted. We remain positive on the growth trajectory of the insurance business, going forward.

Q. What is your take on FM's announcements? How do you see the measures panning out?

A: The announcements made by the FM for supporting stressed sectors in the economy have been well thought out and should go a long way in alleviating the pain experienced by these sectors due to the shutdown of the economy. The targeted lending facility of 3 lakh crores for SMEs and MSMEs, which is fully guaranteed by the government, is a welcome step as it helps them tide over the current crisis and return to the growth path. In addition, there is an additional facility of subordinated debt, and an SPV for equity infusion is also helpful for stressed SME/ MSME. For investment grade NBFCs facing a funding crunch, there is an INR 30000 crore facility wherein a full government guarantee is available, and for the lower-rated NBFCs, a partial guarantee is being offered. Apart from these, there are policy changes to make SME/MSME more competitive by removing the requirement of a global tender for government tenders up to 200 crores. There have been relaxations offered for TDS/TCS and the filing of returns to make the operational issues smooth and easy. We believe these announcements will help these troubled sectors, but the key is timely execution without further delays.

Q: Which insurance product segment do you see a pick-up in, and where is the major drop? Where is the moratorium majorly sought?

A: We see a pick-up in health insurance and life insurance products, driven by a sentiment to have adequate coverage in such uncertain times. Travel-related insurance products have seen a drop-in demand for obvious reasons, given that the travel and hospitality industry has been the worst affected due to the pandemic. Car sales have come to a standstill, impacting the car insurance premiums. There is no moratorium announced for insurance premium payments, but policyholders have been offered an extension in the time for paying premiums due during the lockdown period. This is being done for easing operations for policyholders in these difficult times.

Q: Have you seen any impact on premium collection due to the lockdown? With offices shut across India, how are you coping with this situation?

A: I have addressed this in the previous question.

Q: Given the opportunity for digitising the whole relationship between the customer and you, how do you see things moving forward?

A: This is one of the best opportunities to leverage digital reach, and companies having efficient digital platforms will be winners in the coming years. Already, things are moving at a fast pace, and most insurers are trying to make end-to-end interactions with customers digital. We see a large part of the policy issuance and policy servicing moving onto digital platforms, and this will result in the ease of buying and claim servicing for customers. Bajaj Allianz offers one of the best digital platforms for its customers and partners, making policy buying and servicing a seamless experience. Our Caringly Yours app is one of the most powerful apps for your general insurance requirements.

Q. What kind of growth do you project for the industry in the near term and long term?

A: Over the longer term, we expect healthy growth of 15-20% per annum for the insurance industry.

Q. What is the strategy, going forward, given there are chances of the lockdown getting extended?

A: We at Bajaj Allianz are fully equipped to service our partners and customers digitally; hence, we do not see the lockdown as an impediment. Obviously, an early move out of the lockdown will help the industry move back to regular business and growth, and we do hope the fight against Covid-19 is won quickly.

Q. Which asset class do you find attractive at the moment for rolling over your premium funds?

A: We see many attractive opportunities in equity markets, given that many stocks and sectors have corrected meaningfully. The government is trying to kickstart the economy through fiscal and monetary measures, and equities should be a major beneficiary of these stimulus measures. We also see opportunities in government bonds as interest rates are likely to remain low for longer, given the current economic situation. Based on the individual risk appetite, a well-balanced portfolio of high-quality bonds and equities will do well in current circumstances.


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