 "Irda cracks whip on heavy group insurance discounts")
With the Insurance Regulatory and Development Authority (Irda) cracking down on general insurance companies offering heavy discounts in group insurance portfolio for corporates, employees may soon have to pay more out of their pockets to avail of these schemes.
This is because premiums would go up and companies may pass it on to its workforce.
The regulator, in its guidelines on pricing of risk, has said industry-wise loss cost must be the starting point and should be considered for pricing a product. Burning costs must be looked into.
Due to this, heavy discounts, especially in group health schemes, are expected to cease and premiums likely to increase. Since the company usually pays for the purchase of the group health product that covers the insured, if prices increase, it will be passed on to the customer.
"Some corporates have already begun to charge employees when they decide to cover their spouse, child or parents as part of the group. Now, the pricing will be at least 18-20 per cent higher for large accounts," said the chief executive of a mid-sized insurance firm.
He added that the insurance companies may also ask corporates to co-pay some of the out-of-pocket expenses like prescriptive drugs or doctor consultation fee, which will then be passed on to employees. Co-pay means a fixed amount that is to be paid. Irda has said insurance companies can consider burning cost - an insurance-industry calculation of excess losses divided by total subject premium - of a particular risk on its own past acceptances for all available products.
Irda has said they will monitor compliance to these norms closely and any deviation will be viewed seriously.
It further said since burning cost for property risks, published by Insurance Information Bureau of India, are for perils other than natural catastrophe, insurers need to consider adequate pricing for these risks, if offered.
Applicable on fire, property and group health space in the initial phase, this will be enforced from January 1, 2015. Fire, property and group health segment has seen heavy discounts offered inspite of insured losses going up.
Burning cost is the estimated cost of claims in the forthcoming insurance period, calculated from previous years' experience adjusted for changes in the numbers insured, the nature of cover and rate of medical inflation. This is a ratio used by insurers to protect themselves from larger claims that exceed premiums paid.
Experts said that unhealthy competition is eroding the group health space with prices as low as 20 per cent less than previous year inspite of claims.
Industry players said that there is not just transfer of accounts from private to public, but also from one private non-life insurer to the other. Industry experts believe that it is not sensible to offer discounts to large profitable firms, since they are capable of purchasing insurance without a subsidy.
Health insurance, which has an almost 23 per cent market share in the general insurance space, has seen the incurred claims ratio touch 96.43 per cent in FY13, as compared to 94 per cent in FY12.
This is because premiums would go up and companies may pass it on to its workforce.
The regulator, in its guidelines on pricing of risk, has said industry-wise loss cost must be the starting point and should be considered for pricing a product. Burning costs must be looked into.
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"Health insurance claims are on the rise and this has led to increase in losses. Now that the regulator has mandated that there should be an appropriate board-approved policy, prices will automatically go up," said the head of underwriting at a non-life insurance company.
Due to this, heavy discounts, especially in group health schemes, are expected to cease and premiums likely to increase. Since the company usually pays for the purchase of the group health product that covers the insured, if prices increase, it will be passed on to the customer.
"Some corporates have already begun to charge employees when they decide to cover their spouse, child or parents as part of the group. Now, the pricing will be at least 18-20 per cent higher for large accounts," said the chief executive of a mid-sized insurance firm.
He added that the insurance companies may also ask corporates to co-pay some of the out-of-pocket expenses like prescriptive drugs or doctor consultation fee, which will then be passed on to employees. Co-pay means a fixed amount that is to be paid. Irda has said insurance companies can consider burning cost - an insurance-industry calculation of excess losses divided by total subject premium - of a particular risk on its own past acceptances for all available products.
Irda has said they will monitor compliance to these norms closely and any deviation will be viewed seriously.
It further said since burning cost for property risks, published by Insurance Information Bureau of India, are for perils other than natural catastrophe, insurers need to consider adequate pricing for these risks, if offered.
Applicable on fire, property and group health space in the initial phase, this will be enforced from January 1, 2015. Fire, property and group health segment has seen heavy discounts offered inspite of insured losses going up.
Burning cost is the estimated cost of claims in the forthcoming insurance period, calculated from previous years' experience adjusted for changes in the numbers insured, the nature of cover and rate of medical inflation. This is a ratio used by insurers to protect themselves from larger claims that exceed premiums paid.
Experts said that unhealthy competition is eroding the group health space with prices as low as 20 per cent less than previous year inspite of claims.
Industry players said that there is not just transfer of accounts from private to public, but also from one private non-life insurer to the other. Industry experts believe that it is not sensible to offer discounts to large profitable firms, since they are capable of purchasing insurance without a subsidy.
Health insurance, which has an almost 23 per cent market share in the general insurance space, has seen the incurred claims ratio touch 96.43 per cent in FY13, as compared to 94 per cent in FY12.