The Hindu Business Line : Easier norms for stand-alone health insurance companies

The Government has accepted the Insurance Regulatory and Development Authority's (IRDA) recommendation to lower the minimum capital requirement for stand-alone health insurance companies from Rs 100 crore to Rs 50 crore, an IRDA official said.

"The IRDA has suggested amendments in the Insurance Act 1938 to provide for a differential capital for setting up Standalone Health Insurance Companies with the sole objective of promoting the health insurance business in India. The Government has accepted this recommendation and is considering proposing amendments in the Insurance Act accordingly," said the health insurance report of the Committee on Public Sector Undertakings, presented in the Lok Sabha in March.

The insurance regulator is now working on separate norms for health insurers, which includes reducing the minimum solvency requirement.

Different technique

"The IRDA is considering using a different technique — `the risk-based capital method' — for assessing the solvency requirement for stand-alone health insurance. The solvency requirement could then be lower than the conventional method," Mr C.S. Rao, Chairman, IRDA, told Business Line.

"We are working on separate regulation for health insurers in terms of registration, investment guidelines, supervision as well as solvency," he said. Solvency margin means the excess of assets an insurance company is required to maintain over its liabilities. Like capital adequacy ratio for banks, solvency margin is part of the prudential norms. All insurers in India have to maintain a solvency margin of 150 per cent irrespective of the kind of business they are involved in.

Insurers have hoped for a shift to the risk-based capital method as maintaining 150 per cent solvency margin has been found to be high and has meant less unencumbered capital to write new business. The risk-based technique, however, measures various categories of risks and arrives at an overall capital amount.

So far, Star Health and Allied Insurance is the only stand-alone health insurer in the country. But a number of companies have expressed interest in entering the sector. The Apollo Hospitals group has tied up with Deutsche Krankenversicherung AG of Germany for setting up a stand-alone health insurance company. Commercial health insurance covers just 1 per cent of the country's population.

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