New Delhi: Faced with a higher incidence of claims payouts on group health insurance schemes, several general insurers have decided to increase the premium rates on such policies by 15-20%.
“The premium rates will keep going up as group health insurance is a loss-making business,” said Sanjay Datta, head (health and accident) at ICICI Lombard General Insurance Co. Ltd. “Retail business is much more profitable and rates are sustainable in the retail segment.”
Health insurance policies, including retail and group policies, offer annual covers for hospitalization expenses. While group health insurance in the country has been a tough business, the retail business has been a profitable segment.
The claims payout in the retail business is around Rs50-60 for every Rs100 collected as premium, but in group insurance, the payout claims are much higher, said Deepak Mendiratta, managing director of Health and Insurance Integrated, a health care consultancy.
“Wherever loss ratios are on the higher side, we are going to increase the premium rates. We can increase the rates by 20% where the payout is higher,” said a senior National Insurance Co. Ltd official, who did not want to be identified.
Since 2007, when premiums ceased being set by the tariff advisory committee, premium rates have gone up substantially for group policies. Earlier, before the removal of tariffs, loss-making segments such as group health insurance were cross-subsidized by profit-making segments of fire and engineering insurance.
However, a sharp fall in the premium rates of fire and engineering policies after tariffs were removed led to a rise in health insurance rates.
“Over the past two years, premium rates have gone up by 20-25% in the group business. It can further go up by 15-20%. This is mainly on account of no more cross-subsidization of businesses,” said ICICI Lombard’s Datta.
“Group health business is dependent on the type of cover provided and the kind of population covered,” said Milind Chalisgaonkar, chief executive officer of Bharti AXA General Insurance Co. Ltd. “It also depends on the area where the company is located... Metros have higher costs than the smaller towns. They will go up on a case-to-case basis based on their claim ratios in the past.”
But not all firms are badly affected. Oriental Insurance Co. Ltd, for instance, has seen fewer claims this year, which it attributes to better underwriting and settlement procedures. “Health insurance claim rates have gone down 14-15% last year. If this continues, we will give advantage of reduced premium to customers,” said Niraj Kumar, general manager, Oriental Insurance.