)
Health insurance customers may soon have to loosen their purse strings to pay premiums, if a proposal presented to the Insurance Regulatory and Development Authority of India (Irdai) by an expert committee is accepted.
The committee, constituted to examine health insurance framework in India, has recommended that increase in premiums each year be linked to Consumer Price Index-based (CPI) inflation and that should be CPI-plus-three per cent. This will lead to additional rises in premiums. Standard health policy premiums increase only after three years.
It has suggested the CPI+3 formula be a cap and an insurer should be allowed to increase up to this limit, adding that any higher increase would require the authority’s approval.
CPI-based inflation for April stood at 4.86 per cent, the lowest in four months, on the back of another month of declining food prices, data released by the Central Statistics Office revealed. Consumer Food Price Inflation (CFPI) for April was 5.11 per cent, against 6.14 per cent in March and 9.21 per cent in the same month a year-ago.
“The health inflation at present is almost 16-18 per cent annually. The idea is to have it included into the pricing of the health product, though it may pinch customer pockets,” said a senior private general insurance executive who was part of the committee.
According to the report given to Irdai, the committee recommended that insurers might have a category of close ended products (termed pilot products) running for a period of five years from the date of their launch.
Presently, once a health product is launched by a general insurance company, the pricing cannot be tweaked for the next three years. Only after three years the pricing can be revised based on inflation and claims filed.
“The current norms do not give flexibility to the insurers to (fix) price (of the) products as per the corresponding rise in costs of medicines and hospital charges. If CPI is used as a benchmark, pricing would be more effective. Heavy losses in health portfolio will also come down,” said a chief executive of a standalone health insurer.
Irdai had constituted a11 member committee in December 2014 with members from the private sector public sector life and general insurers, apart from members from the regulatory body and General Insurance Council to look into products, distribution, financial matters, M&A and policy-holders' interests in health insurance space.
However, for young customers, the price increase would not be as sharp as for older customers. According to the committee, use of premium discount structures as a risk management tool to incentivise customers through wellness and preventive care mechanisms to actively manage health may be permitted. This, it said, is specifically recommended because not only does it leads people to live a healthy but also reduces the claim cost in the long run for health insurers.
