January 16, 2012

INDIA: Not Too Old To Insure

MUMBAI / The Financial Express / Editorial / January 16, 2012


The Insurance Regulatory and Development Authority’s reported move to do away with the age limit for purchasing health insurance policy is a welcome step and will help senior citizens who need health insurance the most. 


While a standalone health insurer (Apollo Munich) has already filed a product where anybody at any age can take a health insurance policy, the current mandated entry age for public and private insurers for existing health insurance plans is capped at 65 years. 


Renewal beyond the age of 70 is difficult, despite a 2008 notification from the regulator that no insurer should refuse to renew the policy of an older person or load her with extra premium without giving a valid reason for doing so. 


The pricing of age-fee policies will be a major challenge as the average claim paid in the 70+ age group is the second-highest apart from the age group of under-1. 


Data from Life Insurance Council shows that in 2009-10, the average claim paid in the 70+ age group was R34,601 and there were 1,34,458 claims. In contrast, for the 41-60 age group, where the number of claims were the highest, the average claim paid was R23,338. 


Under the current Irda norms, the premium of a health insurance policy should not be more than 15% of the cover, but given the fact that people in the 70+ age group suffer from various major ailments, the regulator will have to come out with a different pricing structure or else insurance companies will find it difficult to underwrite such products as it will be unprofitable to cater to this segment. 


The proposal will face the same fate as unit-linked pension plans where insurers did not find it viable to launch new products when the regulator mandated a 4.5% guarantee. Ultimately, the regulator had to withdraw the guarantee clause.

With the rise in medical expenses, especially in metros, health insurance is one of the most rapidly growing segments for the Indian insurance industry. Total health insurance premium for 2010-11 was R11,480 crore, a growth of 38.22% over the premium written in this segment in 2009-10. 

However, the claims ratio in health still stands at 100% for 2010-11, though a significant improvement from the previous year as public sector insurers formed their own preferred provider network to cut down on inflated hospital bills—claims ratio in the private sector are a healthier 85% as compared to 106% for the public sector.

© 2011: The Indian Express Limited.
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