Insurance uncertainties, big dents on the wallet: second wave grips life in India like a constrictor – The Economic Times

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Synopsis–As India fights pandemic’s second wave, the impact has been more deep-rooted. Families’ budgets have been shaken and more unpleasant realities are coming to the fore. We interacted with 10 Covid-19 positive patients to understand and estimate the actual impact on discretionary spending, the possibility of job losses, and stress, if any, on small and medium scale businesses.

The second wave is expected to spare no one.

Despite taking all the necessary precautions, keeping external interactions and movements to a bare minimum and hardly any socialisation, Covid-19 has hit a lot of my relatives and friends. I have witnessed more than 10 deaths in my close contacts.

Covid-19 is everywhere. Any person you speak to has some or the other near and dear one who has either recovered, tested positive, or in extreme cases, lost a dear life.

It was no different with me. Without any extra effort, I was able to speak to 10-15 near and dear ones who were infected at the same time with varying levels of complications and severity.

The takeaways from regular interactions with these patients and their families aim to provide an insight on what goes behind the reported numbers, how it is impacting consumption, and whether this will permanently change consumer habits.

The interactions were spread across a variety of patients — from domestic help, who recovered primarily on a government health infrastructure, to patients with a comorbidity that required long hospitalisation.

Reported data continues to mislead
A large number of people still aren’t getting themselves tested. Reasons for not getting tested include some the belief that a positive result is a social taboo and something which should not be disclosed. Test results continue to take anywhere between 24 hours and 36 hours and false negatives are common. Anxiety and misconception among the broader population also tend to skew testing data towards higher testing rates. It would be safe to assume actual data is under-reported at least by a factor of five.

Diagnostic labs and medicine ‘suppliers’ make hay
There are no standard procedures or treatments when it comes to Covid-19. Every doctor in every city is following their own diagnostic and treatment methodology. For instance, Mumbai doctors typically recommend two CT scans and two blood tests. The cost of these scans and blood tests are also not standardised and can range from INR2,000 to INR5,000 per test. Queues for CT scans are common, with no one wanting to take a chance, a lot of patients get it done right at the onset of symptoms — against the doctor’s advice.

Self-medication is also on the rise along with many forms of treatments followed by doctors in multiple cities. Some doctors prescribe 10 tablets, three times a day and some only multivitamins. Some patients are being recommended remdesivir injections right away, and some are forcing doctors to procure it for them just as a precautionary measure.

Messages with a request for injections continue to float around with an active black market. The requirement of devices that help people bring their oxygen levels up are also in high demand irrespective of whether they are being prescribed by doctors or not.

Insurance treatment uncertainties
Last year, when the virulence of the infection was not very high, an additional insurance policy called Corona Kavach was mandated by Insurance Regulatory Development Authority of India (Irdai). The policy included hospitalisation and home quarantine.
With cases rising, some insurers have stopped issuing new policies that cover home quarantine. Now, with Covid-19 so widespread, some of the policies are only covering acute hospitalisation and with hospitals running full, patients have to recover at home, and their insurance policy may not cover the same.

This is either denting the insurance buyer’s wallet or triggering a long battle with the insurance company.

Peak remains far away
Considering the rising number of cases, we expect the peak in terms of infections for India on a whole could be at least a fortnight away. The just-concluded elections in a large state like West Bengal, movement of migrant workers back to states like Uttar Pradesh could keep the curve rising.

Lockdowns enforced, mobility restricted
The careless behaviour seen earlier by younger people is now on the mend as seen and validated by Google’s mobility report for India.
Local traders are ready for voluntary lockdown and smaller businesses are also preparing for the same. Lockdowns of shorter durations (10-15 days) are unlikely to pose a major challenge to the economy. Microfinance institutions would be the ones that would bear the maximum brunt of these lockdowns. However, anything beyond 25-30 days of lockdown could possibly lead to small businesses collapse. The central government has made its intention clear that it does not want a nationwide lockdown and prefers micro-containment zones, which is the right way out if it remains so.

What is the dent on the wallet?
The treatment and recovery costs vary from patient to patient, city to city, and doctor to doctor. The following estimate is based on personal experience and interactions that we have had over the last couple of days.
The risk to the consumer’s wallet starts with hospitalisation, especially when the patient is not adequately covered, and more so when there is more than one family member tested positive. Households with elderly family members are the ones who require hospitalisation. From our sample of 10, three cases of hospitalisation involved elder family members and one case of hospitalisation involving a person below 45 years of age.

While there is no official number on the rate of hospitalisation in the country, media reports point to 7.3% of active cases being critical and requiring intensive care units. It would be fair to assume that the current rate could potentially be in the range of seven to 10 people out of 100 who need hospitalisation or critical care.
Will consumer spending be hit?
This is a key question to which the answer is not clear so far.

Cases where there was no adequate insurance cover or where there was no hospitalisation, point to extra expenses. Cases that involved hospitalisation had adequate insurance cover and hence that impacted the cash flow only temporarily.

There have been experiences where patients were not able to source the required financial resources and had to borrow money typically from friends, family, or gold lenders.

Moreover, an active black market for key drugs and injections also means that the expense would not be covered by their insurance providers, leaving another dent in the affected person’s wallet.

The wealth distribution versus destruction argument may not be valid here as the current wealth distribution is highly skewed towards specific parts of the society (doctors, hospitals, diagnostic chains). The psychological effect, as the wave rises, may have a lasting impact on the spending pattern of the infected patient and their families irrespective of their insurance coverage.

The lockdown and work from home excitement that triggered myriad spending habits the last time around, appears to be absent in the second wave.

How should investors position themselves?
Lending institutions are the most vulnerable: Current interactions indicate no major stress for lending institutions like banks or non-banking financial companies. Some stress is visible at microfinance institutions, especially the ones that have borrowers relying on daily wages, like smaller kirana shops. So far, there is no widespread indication of job losses or salary cuts.

Gold loans/personal loans could see an uptick: Gold loans or personal loans are often the last resort. Companies offering such products could potentially see some uptick in disbursements if hospitalisation rates inch higher and the cost of treatment for complicated cases dents savings.

Diagnostic chains and insurance: Quick diagnostics are likely to be a norm, and the awareness for having an adequate insurance cover is likely to amplify. Although there are strict pricing controls in some states when it comes to charging customers for tests and diagnostics associated with Covid-19, overall, the consumer’s habit is likely to change and so is his willingness to pay for diagnostics and health insurance.

People are stocking, but supply chains remain crippled: Online grocery-ordering websites are again showing high order backlogs and long delivery schedules. This is driven by pantry stocking due to fear of lockdowns, not wanting to go out due to safety, and reduced workforce. This may not translate into robust revenue growth that was seen in the first wave, primarily due to broken supply chains because of lockdowns and health issues. The in-home consumption excitement in the second wave is also virtually non-existent.

(Graphics by Sadhana Saxena)

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