New Delhi: Insurance companies have increased premiums on group health-care policies by between 10% and 50% because they are no longer able to subsidise these with higher premiums on fire and engineering policies.
Companies, the main customers for such policies that are taken out to cover their employees, have either withdrawn them altogether or are giving their employees restricted coverage.
“Premium rates for group health care have gone up considerably this year,” said S.K. Sethi, vice-president of Insurance Brokers Association of India.
Companies could withdraw these policies “or employees would be forced to contribute to their mediclaim policies,” added Arun Kohli, managing director of Paramount Insurance Brokers Pvt. Ltd, a Noida-based insurance broker.
Another insurance broker, Pavanjit Singh Dhingra, vice-president of Gurgaon-based Prudent Insurance Brokers Pvt. Ltd, said that some companies were no longer covering employees’ parents and children through group health-care policies
According to Kohli, the increase in premiums has come about because insurance firms are increasingly “evaluating health policies on a standalone basis”.
Health insurance in India has never been a profitable business. Most insurance companies say that for every Rs100 they collect as premium, they end up paying out Rs120-140 as claims. The companies used to subsidize this with premiums from profitable segments such as fire and engineering.
However, in January 2007, India’s insurance sector regulator, Insurance Regulatory and Development Authority (Irda), allowed the “detariffing” of fire and engineering policies, which meant that companies were free to set their own rates.
The resulting competition has caused prices of these policies to fall by between 50% and 70% in some cases. The result: higher premiums for health care policies.
One executive at an insurance company termed the increase in premiums on group health care policies “a rationalization.” “With high claim ratio and no cross-subsidy there was a need of corrective action,” said Niraj Kumar, general manger of The Oriental Insurance Company Ltd. “After free-pricing, it is important for a portfolio to stand on its own,” Kumar added.
Irda said it had no role to play in the issue. “It is the responsibility of companies to give insurance to their employees. The matter has to be resolved between the insurance company and the insured with no role to be played by the regulatory body,” said C.S. Rao, chairman, Irda.