Covid and the surge in mortalities in the second year of the pandemic had led to many international reinsurers hiking their rates. Some had even withdrawn from the market in the wake of the second wave of the coronavirus. At the same time, the pandemic resulted in increased awareness of life protection, increasing demand for new insurance policies and improving the persistence of those who had already bought cover.
“As far as health outcomes (of the pandemic) are concerned, there may not be enough research right now. But in terms of deaths, the mortality variance in our embedded value is positive,” said Kannan. This means that death claims during the period have been lower than expected.
According to Kannan, it is natural for insurance companies to make a loss during a pandemic. “For a life insurance company, if we do not make a loss in a once-in-a-hundred-years pandemic, that means that you are not covering enough lives,” said Kannan. He added that reinsurance companies should also take a similar approach.
“Also, I do not think mortality risks, or mortality assessment going beyond expectations, kill an insurance company because the risks are granular. Investment decisions and guarantees can kill a company, and we have seen that during the global financial crisis. I think reinsurers should take a long-term view on this,” said Kannan.
According to Kannan, markets desperately need more capacity in reinsurance. He said companies could be extremely prudent in their underwriting but they still need reinsurance for capital relief.
“When the reinsurance price increase happened, we said beyond a point, the price increase doesn’t make any sense. So we retained more risks on our books, and we had capital so we could say we are not going to increase the price beyond what we think it is,” said Kannan.
Kannan, who will retire on completion of his tenure of appointment on June 18, said that the insurance regulator’s decision to consider issuing composite licences was a welcome one as it would allow life companies to get into health covers. “Outcomes can be better for health and life insurance businesses if done together. Morbidity goes with mortality assessment,” said Kannan.
He added that this would enable life companies to use their large distribution to cover health and encourage customers to look after themselves. “The third area is insuretech and fintech which could be done better with partnerships. Innovation can be better in startups than in big companies,” he said.