Premium rates of group health insurance policies are set to rise, as to curtail losses, Government has asked PSU general insurance companies to either increase premiums or stop renewing group health insurance policies.
At present, the combined ratio-claims paid plus other expenses as a percentage of premium earned-is close to 150%. The combined loss on account of such discounts of four state-run non-life insurers is expected to be around Rs 1,500 crore for FY’12. Therefore, government has issued a directive for PSU general insurers to curve losses.
Public sector general insurers are offering huge discounts to corporate customer to grab wider market share.
Since 2007 when prices were freed, PSU general insurers are facing huge underwriting pressure. The overall loss ratio of companies has been over 100%, which means companies are making profit only on their investments.
Government wants to make sure there is audit of individual portfolio so there is no segment vise loss.
Health insurance segment is one of the fastest growing segments of general insurers, accounting one-fourth of the total gross premium income. Hence, despite it is acknowledged as the product of inadequate pricing many insurers continue offering discounts for sustained premium inflows.
Government has also asked PSU non-life insurers to cap brokerage and commission at 5% of the premium.
Government has also asked PSU insurers to introduce co-payment ratio of 20% that means policyholder has to pay Rs 20 for every claim of Rs 100.
Government has also told insurers to acquire customers of lower age groups.
To curve competition-induced losses, government has also directed insurers to obtain No Objection nod from the chairman of the existing insurer before underwriting a new business.
Companies will have to share data on premium, claims and frauds among themselves.
The boards of state-run insurers will need to review their performance every quarter.