Stop discounts on group health covers, says Irda
22 Mar, 2014 01:01 PM
General insurers welcomed the initiative of the regulator to look curbing discount offers by companies on group covers at the cost of individual health insurance covers.

"Many companies have gone overboard on discounts on group covers with the result that these customers end up paying lower premiums than individual health policy holders. We are keen to stop this practice and have started calling for claims ratio and data from individual companies. There should be equitable treatment for all," T S Vijayan, chairman, Insurance Regulatory and Development Authority (Irda), said on the sidelines of a press conference in the city on Thursday.

GSrinivasan, CMD of New India Insurance, said, "We are also of the view that the time has come for group health insurance to stand on its own."

Mukesh Kumar, head, marketing, strategy planning and HR, HDFC Ergo said, "The claims ratio in the group health for the general insurance industry has been over 100% for quite a few years now. The pricing has not been adequate on such policies to cover the loss."

As per industry estimates, loss ratios in group covers stood at 104% during 2012-13 as against 55% for retail policy covers. A loss ratio is the ratio of total losses incurred (paid and reserved) in claims plus adjustment expenses divided by the total premiums earned. For example, if an insurance company pays 60 in claims for every 100 in collected premiums, then its loss ratio is 60% with a profit ratio of 40%. A loss ratio over 100 indicates that the company is paying more in claims than what it is getting in premiums.

Prior to de-tariffing in 2007 of motor, fire and engineering policies, loss ratios in group health covers ranged between 120% to 130% as they ended up subsidizing the high premiums charged in fire and engineering lines.

Insurers also state that one reason for higher loss ratios in group covers is due to indiscriminate price offers by insurers to grab the account and thereby their top line. "We had given a quote of 110 crore annual premium for a group cover for 20,000 people but another insurer came and give a price of 75 crore and walked away with the account," said a senior official from a private insurance company who did not wish to be identified. "If a risk based pricing on a group cover says 100, many insurers are willing to pick it up at 40, with a focus on the top line (additions to gross written premiums ). But what they are forgetting is that such an approach can end up bleeding the bottom line," said another insurer.

On its part, New India Insurance is looking to tackle its group health portfolio in a more holistic manner. "Many of our group customers are very old and we have good relationships with them. We have incorporated elements like wellness programme so that the overall quality of the group improves," Srinivasan said.
Source : The Times Of India

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