Rising medical treatment costs and high claims ratios are likely to force health insurers to increase premium rates by 15-20% this year. For instance, New India Assurance recently got Insurance Regulatory and Development Authority (IRDA) approval to increase the premiums on its health insurance policies.
As New India Assurance is the largest general insurance company in India and sets benchmark for the industry, other insurers are expected to follow suit.
New India Assurance said that its present premium rates were fixed almost six years ago. The old rates have not kept up with the inflation in medical costs.
The health insurance rates vary for different segments depending on the claims experience, but the average increase across segments this year is around 20%, said New India Assurance.
The average claims ratio with regard to health insurance, including group and individual, is around 120% for general insurers. That means, for every Rs 100 collected by way of premium, the general insurer pays out Rs 120 in claims, thereby making the portfolio loss making.
Medical inflation rates have been rising around 15% every year. Hence, insurers have requested the IRDA to allow them to increase the health insurance premium rates by 10-15%.
Apart from increasing premium rates, most private insurance companies such as ICICI Lombard, Future Generali and Bajaj Allianz General Insurance have shifted to in-house settlement of claims to improve efficiency.
The four public sector general insurers –Oriental insurance, New India Assurance, National Insurance and United India Insurance – are currently in the process of floating their own Third Party Administrator (TPA), aimed at minimizing fraudulent claims and lowering the claims ratio. The TPA is expected to be operational by January 2014.
