Insurers push accident cover sale to schools

Schools and colleges have become the new hunting ground for non-life insurers, eager to push personal accident policies, a segment which has traditionally seen low claims.

Tata AIG General Insurance, which is the market leader in personal accident covers, eyes 200 per cent growth in income from this segment. It has tied up with a number of education consultants for its Prudent Guard policy for students.

"There is a need to create awareness about the product. We are sending teams to schools and colleges, but most of the time it is intermediaries who bring in business," said Tata AIG General Insurance chief executive officer Gaurav Garg.

Insurers sell two types of personal accident cover to schools -- one for students and another for parents. Some insurers also sell hybrid product covering both.

"We have seen schools increasingly taking this cover. Since students are more prone to accidents, they should be insured. We would like students' personal accident cover to contribute 25 per cent of the PA income, which is at less than 5 per cent now," said Sanjay Dutta, ICICI Lombard head of health.

The group personal accident policy bought by schools and colleges covers financial losses resulting from an accident or disability. The sum assured varies from Rs 50,000 to Rs 100,000.

While a health policy covers the cost of hospitalisation and treatment, a PA policy covers the financial losses that a student or his family would suffer.

The premium that an institute pays depends on a number of factors such as the number of school hours, kind of activities such as swimming, outdoor training and other physical training undertaken by schools, etc.

"Military schools have to pay more premium as the risk is high because they carry out a lot of physical activity. Similarly, the premium for a boarding school would be 10-15 per cent higher as compared to a day school," said Oriental Insurance general manager Neeraj Kumar.

However, the premium also depends on the coverage and increases with each extra cover.  A big catch for insurers is the low claims ratio, which is less than 5 per cent of the total business underwritten. In comparison, categories such as group health have claims ratio exceeding 100 per cent.

An insurance company executive said the cost of covering one student was as low as Rs 5. The premium ranges between 0.03 per cent and 0.05 per cent of the sum assured.

Schools and colleges pass on the cost of coverage to parents and also make money in the bargain, according to an insurance company executive. While an insurance company charges educational institutions Rs 5 per student to provide PA cover, the institute charges parents Rs 25-30 per month.

"This is a highly profitable business for schools, and they end up making money. As the premium falls below Rs 5 per student, some schools make around Rs 70-80 lakhs (Rs 7-8 million)," said the executive.

While private schools are becoming more aware about the policy, state governments take cover for students in rural areas. The sum assured for rural schools is around Rs 50,000.