What is New - General Insurance in India

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What is New - General Insurance in India
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Post de-tariffing of market in 2007 the general
insurers in India have free market approach to
price their products except for motor third party
insurance. Sustainable growth is the life line
for any business and insurance is no exception to
it. Insurers must have the 360 degree view of
their business . The Regulator, who watches the
interest of the policyholders, however observed
that despite its advisories the free market
regime coupled with intense competition amongst
insurers their obsession for the top-line is
resulting into deficient assessment of insurable
risks, in corporate sector, and that the prices
are offered to these corporate clients for
property insurance and group health insurance at
non-viable rates which are ultimately subsidized
by the buyers of retail products.
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These corporate with loss making group health
covers continue to escape price hikes by shopping
for new insurers. The chase to build up top line
and the pressure on marketing force of the
insurers for their targets resulted in health
insurers willingness to accept the business even
not covering expected claim cost ignoring loading
for medical inflation, acquisition cost ,
servicing cost by third party administrators and
management expenses.  The industry-wide burning
cost is available with IIB (Insurance Information
Bureau of India) for Fire and Property Insurance
but such industry-wide burning cost for group
health is not available. The Authority is also
aware that brokers are not disclosing all details
of group health experience to insurers at the
time of RFQ (request for quote). In health
insurance the trend incidence rate usually does
not vary from year to year.
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However, the average claim cost bears the impact
of medical inflation to some extent. Till the IIB
is ready with the industry-wide Burning cost in
group health segment the authority has tightened
the reporting parameters. It has prescribed that
the intermediary or the client will mandatory
have to sign and disclose the claim cost of last
year and preceding two years in the input format
designed by General Insurance Council of India
(GI Council). This will surely improve the
disclosure and will put insurers in a better
position to assess the risk on quality data
necessary to price the risk.
With uniform data now available to underwriters
if any of them choose to price the group health
risk lower than burning cost than it will have to
have the approval of its Board of Directors.
Further this will have to be filed in form of
Exception Report in a format to be designed by
IRDA.
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The Regulator has initiated this move to see
right pricing coming into the market and
corporate governance in the business behavior of
the insurers. The move signals that premium for
this fastest growing portfolio would be rising in
last quarter of 2014-15 or else there will be
reduction in the benefits including caps beings
introduced for procedures or else employers will
seek sharing of cost from employees for present
benefit design of their health protection covers.
Thank you!
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