FinMin warns state-run GIs on mounting group mediclaim losses

The finance ministry has come down heavily on the state-owned general insurers for running their group health insurance business in perennial losses.
While the segment-wise figures of losses are not available for the year gone by, the state-owned general insurers saw their underwriting losses soaring nearly 41 per cent to Rs 16,000 crore in 2016-17.
The umbrella body of the industry, the General Insurance Council, does not have the segmented data on group health insurance losses.
As a whole, the underwriting losses of the industry dipped 3.45 per cent to Rs 18,968 crore for the fiscal 2017 thanks to better show by the private players, while the state-owned players' underwriting losses soared by a whopping 40.55 per cent to Rs 16,000 crore in FY17 from Rs 10,848 crore in FY16. As against this, the private sector players' such losses came down to Rs 2,956 crore from Rs 3,654 crore a year ago.

The finance ministry, in a recent letter, asked the CMDs of the state-run general insurers to put in place an appropriate mechanism for pricing group health cover by taking into account the existing incurred claim ratios, management expenses, medical inflation, commissions, likely increase in claims due to ageing, increase in size of group and above all, the cost of underwriting.
According to the latest data from the General Insurance Council, the group mediclaim portfolio of the general insurance industry rose a tepid 4.9 per cent to Rs 2,317 crore in April from Rs 2,209 crore a year ago. But the private sector recorded much higher growth.

But private players have been faring much better on this front with their group mediclaim portfolios clipping past 31 per cent to Rs 563 crore in April from Rs 430 crore a year ago, while the growth of standalone players was more robust at 90 per cent at Rs 108 crore.

The advisory from ministry is part of the various communication on corporate governance, focus on profitability and underwriting prudence that the government sends out from time to time.
When contacted, National Insurance said it does have a pricing mechanism for its corporate health insurance products.
"We always take into consideration the incurred loss experience of past two-three years, cost of operations and the projected outgo in the coming year. The renewal pricing of each large employee benefit programme of corporates are always based on these broad parameters and then finalised by case to case negotiations," National Insurance chairman Sanath Kumar told PTI.

"In fiscal 2017, we could reprice many such schemes and also exit programmes, where the customer was either reluctant to pay the enhanced premium or where they would have got a better offer," he added.
Oriental Insurance chairman A V Girija Kumar said his company adheres to a careful underwriting of group mediclaim, which is in line with commercial prudence.
"Our approach of prudent underwriting is acknowledged in the market. So we're comfortable with guidelines since we are already following the same," Kumar said.
Private player Bajaj Allianz's group health cover segment grew around 60 per cent in the June quarter and it's hopeful that the segment will grow further.

"We hope this segment will move upward going forward, especially with new start-ups and ventures that are expected to add group health benefits under as part of their employee- friendly policies," head Tapan Singhel said.