Insurance Must-haves During Times of Covid

By Suresh Kumar | Spearhead Insurance

The MUST HAVES in insurance for businesses related to its human capital are

• Group Health Insurance
• Group Super Top-up Insurance
• Group Term Life Insurance

And for the Fixed Assets and for any unforeseen legal liabilities due to their operations, are

• Standard Fire & Special Perils,
• Consequential Loss of Profits Insurance
• Boiler and Pressure Plant Insurance (wherever applicable)
• Public Liability or Commercial General Liability Insurance
• Credit Guarantee Insurance

Current Situation of Health Insurance:

The Ministry of Home Affairs (MHA) in its order dated 15th April 2020: 40-3/2020-DM-I(A), has made it mandatory for all employers to insure their employees with Health Insurance. Companies that have enrolled for the ESI need not go in for a separate Health Insurance plan but should insure their employees with monthly income more than 21,000/- and hence outside the scope of ESIC as of now. Also, majority of businesses employ less than 10 persons per each location or premises and hence are not currently being enrolled under an ESI scheme. Hence, such businesses which are beyond the scope of ESIC should be insured through a Group Health Insurance as per these MHA regulations. The ministry has not mentioned any minimum limit of Sum Insured that an employer must take, but recommended guidelines state that it should be reasonable enough to put the employees out of any financial difficulties due to hospitalization. However, in order to comply with the guidelines and yet save on premiums, many employers are taking the minimum possible premium for a sum insured of around 50,000/- which is totally inadequate and doesn’t solve the purpose if someone were to get treated in a private hospital. This works just as a piece of paper to ensure compliance but is practically useless.

Covid Only Policies:

Added to this, a few insurers who had rolled out some COVID-ONLY covers under the fixed benefit policies on a sandbox or pilot basis have withdrawn these products. Some of them have relaunched the COVID Only covers on an indemnity (“actuals” till the sum insured) basis, with Sum Insured options starting from 10 or 50 thousand per person. The premiums or costs for these COVID only covers are comparably higher and almost 50% of the Normal Health Insurance Policy which covers most of the treatments as an in-patient. The minimum cost of treatment in a private hospital would be at least Rs. 2 lakhs due to room rent and other expenses related to Consumables like the PPE kits, cotton, disposable, food, dietician charges, etc. These additional expenses would not be covered and get disallowed. Hence, more than 25% of the overall treatment cost will not be covered under this.

Recommendation:

Based on the current scenario then, we recommend a wider cover than just a Covid only cover with a minimum of 2 lakhs along with a Super Top-up policy till 5 lakhs to 10 lakh. This policy would work out to be much cheaper than a 5 lakhs cover within a single policy. A normal ‘Top-Up Health’ insurance which requires any single hospitalization cover to exceed the “threshold/Excess/Deductible” is much inferior to a ‘Super Top-up Health’ insurance which takes it on a cumulative basis during the currency of the policy across all family members. Therefore, one should be careful in choosing only a Super-top up rather than a normal top-up policy.

Since COVID is contagious, the family members of the employee would also be exposed and hence they could also be included as dependents in the same group health insurance. Their premium could either be contributed by the organization if it’s as per the employment agreement or be recovered from the employee’s salary.

Another recommendation during these time is a fixed benefit policy specific to COVID that has the extension of daily cash benefit and loss of income cover due to a job loss etc., to provide for some immediate relief.

Group Term Life Insurance:

A Group Term Life Insurance which would be up to 4 or 5 times the annual Income of the employeeis another recommendation. This estimated premium is approximately Rs. 70 per lakh insured but can go higher based on the nature of work and other exposures.

GST of Employee Benefits as Input Credit: Previously, because the Group Health and Group Life Insurance were not mandatory, the GST (@ 18%) paid for these was not allowed to be used as input credit as per  Sub-section 5 of Section 17 of CGST Act 2017.However, with the MHA now making it mandatory, it is deemed an obligation by law that lets the businesses to seek this input credit going forward.

For the Materials, Stocks, Fixed Assets

The Physical Assets can be insured through various options such as Industrial All Risks Insurance, Standard Fire & Special Perils Insurance, Machinery Breakdown for the critical and vulnerable equipment Insurance, Electronic Equipment Insurance etc.

In case of industries where the use of Reactors and Boilers is common in a continuous process, it is mandated by law to have a bare minimum Industrial Public Liability Policy and a Boiler and Pressure Plant Insurance. However, in severe cases such as Bhopal Gas Tragedy in 1984 or the recent incident in Vizag which cause peak damage, the minimum mandatory limits of Rs. 5 crores per Incident and Rs. 15 crores on a cumulative basis for the entire year would fall significantly short. Hence, a Commercial General Liability for the Completed Operations with higher limits of cover must be necessarily sought to cover for peak damage situations.

The organizations should also ensure that the works in progress, safety and emergency plans and exercises are carried out regularly internally to avoid any untoward incidents giving rise to property damage or third-party liability or even public liability. One may refer to the document related to the “SOP for Industry Post Lockdown” released by FICCI in April 2020 for detailed notes for each industry.

Those companies which deal with tangible products that allow credit for its customers should look at taking a cover under Credit Risk Insurance on an annual basis to prevent losses against the defaults of their customers.

Moreover, the organizations should ensure to undertake a complete review and audit of their Risk Management or Business Continuity Plans from third party entities like us to provide for detailed and impartial reports which are more practical and benchmarked against the industry standards.

Individual Insurance

For the individuals, self-employed or the persons who are not covered under any policy should take the cover under a family health insurance plus a Super Top-Up cover in the combination of Rs. 2 lakhs of base cover + Rs. 10 lakhs of super top up cover. The premiums in this combination would work out to be around Rs. 1 to 2 thousand per month based on the age of the family members.

If there is any budget constraint, at least they should opt in for a COVID specific cover which takes care of the immediate relief from any financial distress.

Apart from this, the breadwinner of the family should be opting for a Pure Term Life policy which covers him or her against any loss of life due to natural or accidental means. The minimum limit of sum assured suggested is 3 times of the annual salary and can go up to 10 times depending upon the age and income of the individual.

Hopefully, these recommendations can help you plan your insurance requirements better and for a customized solution, you may call or mail us on 9581882922 / po@spearheadinsurance.com