The Hindu Business Line : Insurers may hike premiums on corporate medical covers

Sources said that the claims ratios in the medical insurance portfolios are currently about 150 per cent. This implied that the claims made by policyholders were far in excess of the premium collected by both the public and private sector non-life insurers.

Some of the public sector insurers had already resorted to premature termination of policies to cut losses, they added, after some of the corporate policyholders declined to entertain mid-term premia hikes.

The sources said that despite the appointment of third party administrators, PSU insurers were unable to contain the losses. In the case of motor insurance also, the claims ratio was well in excess of 150 per cent.

The loss in this portfolio was partly because the premium was administered by the Tariff Advisory Committee of the Insurance Regulatory and Development Authority (IRDA). Insurers had little flexibility to alter motor insurance tariffs.

However, in the case of medical insurance, premia was fixed by the insurers themselves.

Most of them during the last few years had resorted to undercutting of tariffs due to severe competition resulting in low premia, especially for corporate medical policies.

For these bulk covers, the sources said, the competition was intense, especially from the private sector, who were able to undercut the public sector, on account of cross subsidisation.

Corporate medical covers were usually tied to other low claim covers such as fire, they added. Some of the profits derived from these low claim covers were passed on in the form of reduced tariffs in medial insurance.

In the case of the public sector companies, the covers are not tied and each of the portfolios is treated as stand-alone risk. Such an accounting treatment, the sources said, did not allow any of the PSU insurers to cross subsidise.

Besides, attempts by some of them to seek reinsurance support for the portfolios have met with limited success.

This was partly because, medical insurance is a liability-driven covers and tariffs quoted by the reinsurers were also not acceptable to the international partners.

Unlike motor liabilities, the sources said, medical cover was fully provided since maximum losses were known.

Yet despite the liabilities being known, the sources said, large volumes of the losses were from the corporate medical covers.

The option, the sources said, therefore, was to hike tariffs on these covers or introduce new riders in the covers, which would restrict the insurers liabilities.

But riders are not treated as customer-friendly by the PSU insurers and the preferred option was revising the premia to reflect the portfolio losses.

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