The Hindu Business Line : Removal of tariffs will boost health insurance: IRDA chief

“With the removal of tariff, the premium from fire insurance is likely to drop while the premium from health will increase. We expect health insurance to become the second largest business in the next three years,” he said, speaking at the CII Health Seminar in Mumbai on Friday.

Health Insurance premium has jumped from Rs 675 crore in 2001-02 to Rs 3,200 crore in 2006-07. Fire (property) insurance premium stood at around Rs 4,000 crore in 2006-07.

The health business, which was in the fifth position in 2001-02, moved up to the third spot in 2006-07. Motor and fire insurance currently occupy the first and second places.

Fire, engg, motor

Fire, engineering and motor insurance have been following pre-administered rates or tariff. Since January this year insurers were allowed to cut rates-subject to a ceiling. This has meant that insurers are no longer subsidising the health insurance portfolios of corporates to win the more lucrative fire business.

Mr Rao said that the floor rate (of 51 per cent) for discounts on fire and engineering policies would be done away with from November 2007, if the regulator is satisfied with the new rates filed by insurers.

The chairman said that in the past 40 years, public sector companies had focused on their corporate business but were now beginning to actively look at their individual business (personal lines).

IRDA may also advance the deadline for complete free pricing (with changes in wordings of the policies) to January 2008, from April 2008, if satisfied with the report on ‘market wordings’ submitted by the non-life insurers.

As part of the amendment to the Insurance Act, the IRDA has made recommendations to the Government to define a standalone health insurance company and prescribe separate norms for the capital structure and solvency requirements for such companies.

“We have recommended a risk-based capital approach for stand alone health insurance companies which many countries have already moved to for most of their businesses. So, far we have been using the traditional method for solvency,” he said.

The regulator expects two or three more players to enter the health sector in the years to come.

Currently, Star Health and Allied Insurance and Apollo DKV are the only two stand-alone health insurance companies.

IRDA has also set up a committee to look into the problems faced by senior citizens regarding health insurance policies. “There have been complaints that senior citizens are being charged exorbitant rates or are being refused renewal of their policies,” he said.

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