Loss ratios to rise due to no exit age in health insurance

Insurers want premium rates to rise to cap losses

Health insurers in the country are not in the pink of health after the Insurance Regulatory and Development Authority (IRDA) proposed a host of measures in its draft guidelines to improve customer services. The proposal to remove exit age in health insurance is likely to increase loss ratios of general insurance companies, insurers warned.

"This provision will definitely increase the loss ratios. If the coverage has been widened, the prices should also be linked to it. In order to minimise losses, we should be given the freedom to raise prices in the health segment," SS Gopalarathnam, managing director of Cholamandalam MS General Insurance, said.

He added that the losses in the segment post 'no exit-age provision' will vary depending on the age of entry and portfolio of the insured individual.

The insurance regulator's draft said that any one up to the age of 65 years can buy a health insurance product. The move is significant as it aims to include more senior citizens under the health insurance cover. Currently, insurers can deny health cover to people over 60 years.

The draft also proposed that there will be no exit age for health insurance and lifetime renewability of health insurance product will also be possible.

"While this change might lead to a rise in premium, I do not think it would be significant...In my opinion, having no exit age would increase the loss ratios but over a long term would gradually stabilise with suitable underwriting changes," Arun Balakrishnan, chief executive officer of BerkshireInsurance.com, told Business Standard.

A few, however, expressed optimism. P Nandagopal, managing director and chief executive of IndiaFirst Life Insurance, said that losses can be capped through increase in premium rates. IRDA's draft is silent on pricing of health insurance products.

"To improve the segment from future losses, not just premium increase but reinsurance capacity must also improve for health. Reinsurance companies are not very comfortable with the scenario here, as companies do not have any proper data or morbidity," he added.

Max Bupa Health Insurance has been maintaining a no exit age policy from the day of its inception. According to Neeraj Basur, chief financial officer, Max Bupa the company is able to maintain a no exit age policy as its products are "appropriately" priced and underwriting is done at the point of sale itself, rather than at the point of claim.

Industry sources also revealed that health insurers have requested the Life Insurance Council to discuss this issue with IRDA. Insurers have also asked IRDA to consider their proposal of free-pricing of health insurance products.

The final guidelines on health insurance are expected in few weeks.