Insurance Regulatory and Development Authority (IRDA) stated that it will take strict action against insurance companies that accept Group Health Insurance covers at a loss. IRDA is planning to make Group Health Insurance Plans expensive where hospitalization claims from employees exceed the premium paid. This move is directed to add transparency and protect the interests of individual health buyers.
In pursuit to expand their top line, insurance companies are willing to accept business under Group Insurance even if it entails a loss. In certain cases insurers are quoting rates below the burning cost. The burning cost determines the amount of premium required to cover claim payments.
Insurance is a pool of resources. As group premiums are inadequate to meet claims, money from individual health buyers is diverted to settle claims of group plans.
'We are going to increase solvency margins for companies that accept group health insurance at rates below their burning costs. If the group health premium is below the burning costs, we want you to inform your board about this. This will bring discipline into the underwriting process,' said IRDA chairman T. S. Vijayan in his address at a health insurance summit organized by the National Insurance Academy in Mumbai.
He also stressed on the need to create savings-linked insurance plans to deal with the rising costs. Instead of the premium increasing drastically with age, a part of it can go towards savings that can prove useful to aged policy holders, he said.