Premiums on group health insurance could rise by up to 50% as the finance ministry has instructed all public sector insurers to stop giving discounts on such policies, according to media reports.
The ministry has instructed the four public sector insurers—National Insurance, New India Assurance, Oriental Insurance and United India Insurance—to stop giving discounts on policies where combined ratio, or the cost of a policy to the insurer, is more than 100%.
The combined ratio includes the costs on insurance claim, management expenses, commission to agents and to third party administrators (TPAs) and any other expenses that may have been incurred in servicing a policy. According to the directive, all expenses are to be factored into pricing products, hence the potential surge in premiums.
The finance ministry said that the combined ratio is now in the range of 140%-165% on average. The four PSUs have to slash this combined ratio to 95%, according to the directive. The four insurers command more than 60% of the total health insurance segment in India. Group health insurance accounts for more than 50% of this business.
In 2011-12, the total health insurance premium income of all the four PSU companies was Rs 8,145 crore, while the net combined loss for the year was Rs 1,500 crore (assuring a combined rate of 150%) to these firms. The ministry has said that premium should be suitably loaded to recover all expenses related to the insurance policy.
Pankaaj Maalde, head-financial planning, ApnaPaisa.com said, “Group insurance plans are available at discounted rates as large number of employees are covered under the scheme. Also it covers all the pre-existing disease without waiting period and parents of any age can be covered easily under the scheme. Maternity benefits for are also given which in regular mediclaim policy is not covered. Part of the premium is also paid by the employer.”
Mr Maalde further said, “Normally, it is difficult for senior citizens to get fresh mediclaim policy as claim ratio is higher and no company would be willingly accept the proposal. Also these benefits make group insurance plans more attractive compared to regular individual plans. Mostly, all insurers are making huge loss because of the above factors. The instructions from the finance ministry will help them to reduce losses. We always advise our clients to take separate mediclaim policy for their family over employer policy because employer health policy will not continue cover after the retirement or when they leave job or start their own business.”