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S. Bridget Leena

Chennai, Jan. 4 Come April 1 2009, it is to be seen who has better bargaining skills corporates or insurers. Insurers say they can no longer afford to provide insurance at the premium offered currently while corporates, cutting costs due to economic slowdown, would trim insurance coverage.

Cross-subsidisation of health insurance portfolio by the fire portfolio continues even after two years of detariffing of the fire portfolio. It was touted that health insurance will be priced according to the claims and risks of the segment after detariffing in January 2007. Prior to detariffing of the fire portfolio, insurers would sell a bundle of policies such as property, engineering and health to corporates at a fixed premium. Insurance companies, particularly public sector insurers, were losing because health insurance claims were 20 per cent more than the premiums collected. Public sector insurers continued providing health insurance coverage to companies in spite of the high loss ratio because they were able to gain from fire portfolio which had limited claim exposure. Mr M. Ramadoss, Chairman and Managing Director, Oriental Insurance, said, “Yes, cross-subsidisation of health segment continues to happen.”

Mr Sandeep Bakshi, Managing Director and CEO, ICICI Lombard, agrees that health insurance is being subsidised but at much reduced levels when compared to the period prior to detariffing. Most companies renew their insurance on April 1 for the financial year. After detariffing from January 2007 companies bargained for lower insurance premiums from insurers, who, due to competition and not wanting to lose big corporate clients, had to relent. This meant discounting of fire premium as they could not increase health insurance premiums in line with their loss claims.

Mr Rahul Agarwal, CEO, Optima Insurance Brokers, said, “Insurers were confronted with two options one to provide the insurance covers at reduced premium or lose big customers.”

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