Detariffing to up premium on staff health insurance

The premium of health insurance taken by corporates for their employees is expected to go up with the proposed detariffing (to price policies depending on the risks involved) of the fire and motor segment by January 2007.

Amol Phadnis, national manager for underwriting, ICICI Lombard, said that the claims from health insurance covering corporates were higher at 100-120 per cent, meaning for every Rs 100 of premium insured the claims arising would be Rs 100 to Rs 120.

On the contrary, the claims are lesser for insuring individuals under mediclaim policy at 60 to 65 per cent, Phadnis said.

In the case of Bajaj Allianz General Insurance, the corporate health insurance has a claim of 150-200 per cent. ICICI Lombard has covered ICICI Bank, Infosys, Accenture, Wipro and Progen, while Bajaj Allainz has covered Bajaj Auto and HDFC Bank, among others.

If claims from insuring corporates are higher under health insurance, the rationale behind why are insurers continuing to provide cover? Antony Jacob, managing director, Royal Sundaram Alliance, has a reason.

He says, usually corporates take a range of covers to insure their plant and machinery against fire, floods and health insurance for their employees. It is profitable to insure companies for property, plant and machinery against fire, as there are lesser number of claims.

However, corporates push for health cover from insurance companies for their employees at a subsidised cost. Despite health insurance having the advantage of pricing its policies depending on the risks involved, it is still a loss-making portfolio as corporates ask insurers to subsidise this segment.

The price (premium) at which insurance policies of cars, bikes, commercial vehicle (motor insurance) and property against theft, fire or floods (fire segment) is fixed by the Insurance Regulatory and Development Authority (Irda) which is expected to be detariffed in the next six months.

The other major reason for incurring loss in the health insurance portfolio is cheating.

V Jagannathan, managing director, Star Health and Allied Insurance "� the only stand-alone health insurance company "� says currently the health insurance of corporates is cross-subsidised which is expected to change with the proposed detariffing of the insurance industry.

Phadnis says that with detariffing, cross-subsidisation will become impossible and therefore premium of health insurance given to corporates are likely to rise.

Jagannathan points out that a stand-alone health insurance company will be able to offer a more competitive price in detariffed scenario compared with the existing price offered by insurance companies, as it specialises and has the expertise in underwriting the risk of only health related insurance policies.