Steep discounts in group health insurance set to go
23 Apr, 2014 01:01 PM
The insurance regulator’s intervention to curb heavy discounts in group health insurance is likely to force general insurers to end the practice of cross-subsidising the portfolio.

Despite losses in the group health insurance space, increasing competition among general insurers to ramp up the top-line has resulted in severe undercutting in the segment with premium rates having declined by 5-10 per cent so far this fiscal, said industry experts.

Group health insurance is attractive for both the employer and the insurer.As far as the employer is concerned, t covers pre-existing diseases from day one, unlike individual policies which have a waiting period of four years.

For the insurance company, it brings in a large pool of employees under its cover in one go.

Generally, insurers cross-subsidise group health insurance as they get other businesses too, such as fire and property insurance, from corporates.

On the other hand, individual health insurance is a profitable segment for most insurers, and they have been raising the premium rates over the last three years.
Many complaints

Recently, TS Vijayan, Chairman of the Insurance Regulatory and Development Authority (IRDA), said the regulator had received many complaints on the unfair discounts given to group policies and, therefore, wanted to ensure that there are no distortions in the premiums paid for individual policies and group policies.

The IRDA has written to insurance companies, through the General Insurance Council, seeking details on the pricing of these policies.

The regulator is planning a meeting with all non-life insurers on May 16 to address the issue.
Insurers’ view

A senior official at a private general insurance company said that the move by the regulator will ensure that general insurers raise rates in the group health insurance segment.

“We have been unable to raise rates even on loss-making accounts as there is intense competition and other insurers queue up to lap up the business,” said a senior official of a public sector general insurance company.

Activist Gaurang Damani, who has filed a public interest litigation in the Bombay High Court seeking transparency in health insurance, said general insurers give priority to group health insurance customers in order to retain the accounts; individual customers at the retail level are not in a position to take on the insurer.

The health insurance industry in India is a highly competitive with 23 general insurance companies and five standalone health insurance companies.
Source : Business Line

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