Group health insurance schemes are known for their lower premiums among buyers. However, their lower premium, high competition, and high healthcare inflation often makes them a loss-making proposition for most insurers. Consequently, buyers will now have to shell more money towards their premium as insurers have geared up to hike the premium rates by 15-20% from April onwards.
Aggressive competition among insurers accompanied by competitive pricing has severely harmed the underwriting profits with even public sector companies reporting heavy losses between ₹900 - ₹1,800 crore in one half of 2016-17 alone. Since health insurance continues to be a major driver in their growth, insurers cannot afford to be out of business and are rethinking on their pricing strategy.
Stating one of the major reasons for insurers tightening their purse, Sanjay Datta, chief, underwriting and claims, ICICI Lombard General Insurance Company said, "This is not just because these policies are competitively priced lower, but also because of higher than expected healthcare inflation.”
The increase in prices is sure to tick off some customers but most insurers are willing to take the risk. A major driver behind the move is that group health insurance schemes form 16% of the total insurance cover in India. They have an enormous share of 48% of industry’s revenue. The biggest concern is that these policies are high on claims also and their losses are at a whopping 120%. Consequently, for every ₹100 of premium, the insurer is paying ₹120 in claims. According to an industry insider, for every ₹4,200 that is collected in gross premium, the insurers are paying ₹4,620 in claims.
Another important reason cited by insurers for a hike in premium is the largely unregulated hospitals in the country. There is no limit on what hospitals can charge from their patients. Therefore, for corporate policies with sub-limits or co-payer option the hike would be between 2-8%, whereas for policies with no sub-limits the hike would be between 8-15%. Considering these factors, most insurers prefer to do less business but with better returns.
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