The Hindu Business Line : Oriental Insurance takes steps to curb losses in medical portfolio

In a move to contain losses on medical insurance portfolios, Oriental Insurance Company Ltd (OIC) has rationalised all commission and brokerage payments.

Under the new scheme there will be no commission or brokerage payments for new medical insurance policies procured for people above 55.

However, these categories of customers would continue to be serviced by the company directly, industry sources said. The rationalisation is now expected to become an industry standard, they added. The new commissions and brokerages are weighted in favour of customers in the lower age bracket.

Industry sources said that the main reason for this is to ensure that agents and brokers procure prime customers, where claims are likely to be low.

The agency commission and brokerage for customers up to 45 years is 15 per cent and 17.5 per cent respectively.

For customers up to 55 years, the commissions and brokerages have been fixed at 10 per cent and 12.5 per cent respectively. For group policies, the commission and brokerages have been fixed at 10 per cent and 12.5 per cent respectively.

The move was made in view of the high loss ratios in medical insurance business. The industry sources said that in medical policies, the insurers continued to face large losses, implying that the claims were far higher than the premiums received. In fact, even after the appointment of third party administrators losses have continued at the original levels. Currently, the losses are estimated at 140 per cent industrywide. The sources said that some of the private insurance companies are already imposing riders on medical insurance policies. These include standardisation of some of the rates and imposing ceilings on certain categories of medical expenses. The public sector, however, continues with the medical insurance policies without any major changes in policy covenants, though standardisation would be welcome.

In fact, some moves for standardisation of medical expenditure have already been initiated with the insurance regulator, the sources added.