As protection against the raging Covid pandemic, insurance regulator Irdai ordered all general and health insurers, on June 26, 2020, to develop two specific Covid standard plans: Covid Kavach and Covid Rakshak, before the July 10th. While the mandatory Covid Kavach is an indemnity plan that pays for hospitalization, Covid Rakshak is optional and a benefit-based plan, which means you get a lump sum on diagnosis from a government-authorized diagnostic center and a continuous hospitalization of 72 hours. Some insurers have already unveiled the products, while others will launch shortly.
Given the fact that basic health plans covering the disease are already on the market, as well as specific Covid plans, what was the need for another exclusive compensation plan to cover Covid? More importantly, what should customers do?
“Covid Kavach is not only standardized, which means that its features are consistent across all insurers, but it is also a more complete version of existing Covid plans. This is because it also covers home care, PPE, and treatment of comorbid conditions when hospitalized, ”says Gurdeep Singh Batra, Director, Retail Insurance, Bajaj Allianz General Insurance. Since these are not covered by basic health plans, you may end up paying out of pocket. The plan also covers ventilator and ICU charges, as well as the cost of the oximeter and oxygen cylinder.
Second, the average size of people’s health plan is Rs 3-5 lakh, which may not be adequate for the high costs of Rs 10-15 lakh involved in Covid treatment. “Also, Covid is highly contagious and the whole family may be affected. In such a case, low coverage will not be able to care for a single person, let alone all family members, “says Bhabatosh Mishra, Director, Claims, Subscription and Product, Max Bupa Health Insurance.
Since everyone may not have high and comprehensive coverage, or may not be able to pay the high premium, or have no health insurance, Kavach may be a good option to cover the greatest risk in the current circumstances. With Covid cases increasing at a rapid rate, especially in larger cities and subways, it can serve as an effective intermediary plan for the short term of 3-9 months. Also, it can be used in combination with basic plans to increase the overall size of the roof. For example, if you have a basic Rs 5 lakh plan that Covid covers, you can take a Rs 5 lakh Kavach plan to upgrade your deck size to Rs 10 lakh.
As for Covid Rakshak, which offers a lump sum, it can be especially helpful in home isolation and treatment because you can spend money at will on medications, treatment or nursing charges. However, remember that the maximum coverage offered by Covid Rakshak is Rs 2.5 lakh instead of Rs 5 lakh for Kavach. “Also keep in mind that Kavach is only an adjunct to a single disease and cannot be a replacement for the more comprehensive basic health plan,” says Mishra. So you can use it to upgrade a basic plan or buy it if you don’t have any plan, but after the risk has been reduced buy a compensation plan, which can even be Arogya Sanjeevani, whose coverage size has now been improved .
The premium rates available to ET Wealth at the time of presenting the story seem reasonable and affordable, with Max Bupa Health Insurance charging a 35-year-old man at Rs 3,260 for coverage of Rs 5 lakh for a period of 9.5 months. Star Health & Allied Insurance, on the other hand, has set the premium for the age bracket from 0 to 45 years at Rs 5,172 for a coverage of Rs 5 for a duration of 9.5 months. The plans are also available for 3.5-month and 6.5-month terms, which include a 15-day waiting period, when no claims will be considered.
Covid Kavach and Covid Rakshak
Ceiling removed for Arogya Sanjeevani plan
Insurers can now offer coverage higher than Rs 5 lakh and lower than Rs 1 lakh, but will the price remain as attractive as before?
The Insurance Development and Regulation Authority of India (Irdai) has removed the upper and lower limits of Arogya Sanjeevani’s standardized health insurance plans. The compensation product was launched in April with a minimum coverage of Rs 1 lakh and a maximum of Rs 5 lakh. These limits have now been removed, which could be a game changer for low-cost standardized plans.
The measure may be a way to provide easier access to the higher decks given the high costs involved in Covid treatment. “After the pandemic outbreak, the cost of hospitalization, especially in larger cities, is becoming high and one should have an ideal coverage of Rs 10-15 lakh. With this in mind, the regulator may have decided to increase the limit, “says Anand Roy, MD, Star Health & Allied Insurance.
A big draw factor for the plan was its low premium compared to similar plans on the market. Will this continue for larger covers? Roy is confident that the premium will continue to be lower than other plans. Sanjay Datta, Head of Insurance, Claims and Reinsurance, ICICI Lombard, agrees: “Since limits and limitations will be maintained, the premium should be less than similar market plans.”
Others, however, are not so sure. “Because the product launched in the pre-Covid period, Covid’s potential impact has not been factored into the price. If the price of the product needs to be changed with this in mind, the premium may increase, ”says Bhabatosh Mishra, Director, Claims, Subscription and Product, Max Bupa Health Insurance. It may not be possible to keep products from Rs 1-5 lakh at the pre-Covid price and those above Rs 5 lakh at new price points. “It will be a challenge to reconcile the two prices,” says Mishra.
Since increasing the size of coverage is not mandatory, not all insurers can. Even though Star Health has decided to introduce higher coverage before next month, others hope to measure demand. The extent to which the tire size will be improved is also not certain. “We can increase it by Rs 2-3 lakh, certainly not go up to Rs 50 lakh. We will make a decision depending on the demand for increased insurance coverage,” says Datta.
If the premium is still low, it will be a good product as it is standardized and comprehensive despite limits. But if the premium is comparable to other plans, the buyer can get better and more complete plans without limits. Rather than buying larger coverage just for Covid-related expenses, it may be better to opt for new Covid specific plan, which covers home care equipment and treatments. If the need is just a larger base deck, wait a couple of months before making a decision.