Companies paring employee health insurance benefits
Companies paring employee health insurance benefits
New Delhi: In a bid to lower the burden of rising insurance premiums, many Indian companies have started withdrawing the benefits they offer to their employees.
Three senior executives of firms involved in the insurance business said the companies have resorted to this move after insurers hiked premiums in the past few months because of the high payouts on account of claims in the group health insurance business.
“Companies across the board are cutting down their insurance cover by 50% to save costs," said Deepak Mendiratta, managing director of Health and Insurance Integrated, a health care consultancy. “While a few companies have stopped covering (employees’) parents, others have reduced maternity benefits." He refused to name any company.
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 profitable.
The claims payout in the retail business is around Rs50-60 for every Rs100 collected as premium, but in group insurance, they are much higher. Faced with a higher incidence of claims payouts on group health insurance schemes, several general insurers had raised the premium rates by 15-20% this year.
“Companies have started reducing the size of their insurance cover. They are looking at rationalization of cover by not giving everything covered in the policy," said Sanjay Datta, head (health and accident) at ICICI Lombard General Insurance Co. Ltd. “The premium rates will keep going up as group health insurance is a loss-making business. Retail business is much more profitable and rates are sustainable in the retail segment."
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 the 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.
“Companies are resorting to cut the size of their insurance cover to cope with the increased cost," said a senior official of National Insurance Co. Ltd, who did not want to be identified.
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