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C. Shivkumar

The public sector insurers have sought Government support to meet the potential liabilities for the health insurance scheme.

Bangalore , Aug. 18

THE four public sector insurance companies' liabilities are expected to mount, leading to weakening of their balance sheets, following the Government's directive on the introduction of the low-premium health insurance scheme.

Sources estimated the liabilities of the four companies to be in excess of Rs 10,000 crore as a result of implementing the scheme this year. Further, they added that the Union Finance Ministry had imposed the scheme only on the four public sector insurers, exempting all the private sector companies.

The scheme announced in the Union Budget for 2003-04 entitles individuals/families falling under the below poverty line category to a reimbursement of medical expenses of Rs 30,000 per year on a premium of Re 1 per day. For a family of five, the premium goes up to Rs 1.5 per day and for a seven-member family, it is Rs 2 per day.

The sources said all the four general insurance companies — New India Assurance Company Ltd, United India Insurance Company Ltd, National Insurance Company Ltd and Oriental Insurance Company Ltd — have been given targets for completing Phase One of the proposal.

In the first phase, at least 50 lakh families are expected to be covered.

According to the sources, these new liabilities were being imposed at a time when the four companies were facing a hefty provisioning burden for meeting third-party claims and unexpired risks.

In addition, the PSU insurers were also expected to fund the impending liabilities on account of the voluntary retirement scheme (VRS) expected to be introduced before the end of the year. The liabilities on account of the VRS are still unprovided for by the companies, since it is yet to receive final Government clearance.

The sources said the liabilities on account of the health insurance scheme were more than double the net worth of all the four companies, currently in the region of about Rs 5,000 crore. Consequently, the sources said, the PSU insurers faced the prospect of a serious weakening of the solvency ratios prescribed by the Insurance Regulatory and Development Authority.

This weakening of the balance sheets would be taking place at a time when the Government was mulling divesting from the four companies. Accordingly, introduction of any large liabilities would hit the prospect of the Government's attempts to realise large values from the companies through divestment/dilution, they added.

Besides, investment incomes have been falling due to softening yields. They also have a large portfolio of non-performing assets, particularly on loans and other debt support to sub-sovereign entities.

The public sector insurers have sought Government support to meet the potential liabilities for the health insurance scheme. They have suggested that the private insurers also be roped in to meet the targets prescribed under the scheme, the sources said.

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