Four PSU insurers lacked appropriate checks and controls: CAG report

Report finds lapses such as multiple settlement of claims, excess payment over insured sum

Inadequate checks leading to multiple claim settlements, excess payment over sum insured, and breaching of capping limit for specific diseases are some of the lapses by four public sector insurers that the Comptroller and Auditor General of India (CAG) has flagged in its report.

The four insurers are New India Assurance Company (NIACL), United India Insurance Company (UIICL), Oriental Insurance Company (OICL), and National Insurance Company (NICL). According to the report, the insurers have incurred an aggregate loss of Rs 26,364 crore in their health insurance portfolio between 2016-17 and 2020-21 on account of group health insurance policies where premium charged was less and claim outgo was more in comparison to retail policies.

The CAG report on “Third Party Administrators (TPAs) in Health Insurance business of Public Sector Insurance Companies” said processing of claims was done digitally both by insurers and TPAs. However, information technology systems of the insurers lacked appropriate checks and controls.

This resulted in lapses, among others, excess payments by ignoring waiting period clause for specific diseases, non-application of co-payment clause, incorrect assessment of admissible claim amount, irregular payments on implants, and non-payment of interest on delayed settlement, the report said.

The auditor’s findings revealed New India Assurance and United India Insurance settled claims more than once on different dates although the policy number, insured name, beneficiary name, hospitalisation dates, illness code, hospital name, and disease were the same.

While New India Assurance had 792 cases of multiple settlements involving a sum of Rs 4.93 crore, 12,532 such cases of Rs 8.60 crore were found at United India Insurance. Besides, 139 instances were found where claims settled exceeded the sum insured, including bonus, by Rs 33 lakh at New India Assurance. At United India, claims paid, including group claims, exceeded the sum insured in 2,223 cases involving Rs 36.13 crore. Group policies include a provision for such excess payment over the sum insured by way of ‘corporate buffer’, the auditor said. However, the verification of claims did not indicate use of such a buffer, the auditor said.

PSU insurance companies have their own network of hospitals called a Preferred Provider Network (PPN), but even after 10 years, enrollment of hospitals under PPN coverage was inadequate, the auditor said.

Four PSU insurers together have PPN agreements with only 2,552 hospitals as against 9,900 in the network of Star Health Insurance Co, and 10,000 hospitals in the network of HDFC Ergo General Insurance Company.

Analysis of fraudulent cashless claims in New India Assurance indicated that in 122 claims involving Rs 1.39 crore, management of PPN hospitals or its employees were involved. However, the PSU insurer failed to initiate action against such hospitals in line with the de-empanelment clause and investigate all claims relating to such hospitals to safeguard its financial interest.

“TPAs failed to report such fraudulent reimbursement claims to New India Assurance Company and continued to settle claims from the insured even after their earlier claims were proved to be fraudulent, instead of taking up with New India Assurance Company to cancel the policy, by invoking the clause regarding cancellation in the policy, it said.

Under the scanner

• 4 PSU insurers incurred aggregate loss of Rs 26,364 crore in health insurance portfolio during 2016-17 to 2020-21
• Losses were on account of group health insurance policies where premium charged was less and claim outgo was more in comparison to retail policies
• About 792 cases of multiple settlements of Rs 4.93 crore found at New India Assurance and 12,532 such cases of Rs 8.60 crore found at United India Insurance
• New India Insurance failed to initiate action against hospitals whose staff was involved in fraudulent cashless claims