Financial Daily from THE HINDU group of publications
Thursday, Jun 30, 2005
Money & Banking
Panel to overhaul group health insurance sector
Mumbai , June 29
GROUP health insurance has become a losing business in India because of unhealthy market practices resorted to by insurers to gain market share, according to a working group on health insurance set up by the Insurance Regulatory and Development Authority (IRDA).
The report of the working group said that general insurers mainly write group health insurance for employer groups as an accommodation cover primarily to gain access to the profitable lines of the employers' insurance portfolio.
Insurers offer lower premium on group health insurance to employers to compensate for other insurance covers such as fire insurance with administered tariff, the report said.
Group health insurance, which constitutes 35 per cent of the health insurance business, thus has been causing claims - to-premium ratio of above 100 per cent for the past few years. "This is a significant example of regulatory rigidities leading to unhealthy market practices," the report said.
Additionally, the definition of a group is widely misused and heterogeneous groups are being formed for the sake of availing discounts.
To overcome this problem, the group has suggested that insurers should start reporting underwriting and operating results of health insurance.
The report also observed that health care providers are resisting price negotiation by forming cartels. "This form of collective bargaining, in the absence of health sector regulations, spells disaster for the efforts of third party administrators and insurers to control claims cost," the report said.
It is suggested that TPAs need to work at gaining the confidence of health care providers to bring them in the fold of health insurance, ideally as risk shares.
Another problem that is plaguing health insurance is the shortage of actuaries. Effective actuarial valuations to estimate future claims provisions would help stem the problem of poor underwriting.
The working group has also given its suggestions in terms of distribution. Since, the distribution of life insurance companies has already been integrated to take care of medical check-ups for its policies, the same infrastructure could be used to deliver health insurance policies, they suggest.
A `free-look period' of 14 days has also been recommended for health insurance products.
The working group has pointed out that penetration of health insurance in the country is woefully low at one per cent of the population. Of the total health spend in the country amounting to about Rs 10,000 crore, the health insurance market size is just Rs 1,200 crore.
"High claims ratios, lack of underwriting discipline, deficiency of credible health expenditure data, absence of health care regulation and structural inefficiencies of the provider network have hampered the development of the health insurance sector".
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