Health Insurance: No exit age in heath covers to increase insurers’ loss ratio

Health insurers in India may not be feeling quite well 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 the exit age in health insurance is likely to increase loss ratios of general insurance companies, insurers fear.

“This provision will definitely increase the loss ratios. If the coverage has been widened, the prices should also be linked to it. To minimise losses, we should be given the freedom to raise prices in the health segment,” S S Gopalarathnam, managing director of Cholamandalam MS General Insurance, said. The losses in the segment after no exit-age provision will vary, depending on the age of entry and portfolio of the insured individual, he added.

The insurance regulator’s draft said anyone up to the age of 65 years could buy a health insurance product. Currently, insurers can deny health cover to people over 60 years.

IN THE PINK OF HEALTH

• The insurance regulator’s draft said anyone up to the age of 65 years could 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 proposal says there will be no exit age for health insurance and lifetime renewability of insurance products will also be possible
• The losses in the segment after no exit-age provision will vary, depending on the age of entry and portfolio of the insured individual
• The draft proposal says there will be no-exit-age for health insurance and lifetime renewability of an insurance product will be possible.

“While this change might lead to a rise in premium, I do not think it would be significant… In my opinion, having a no-exit-age policy would increase the loss ratio. This, however, would gradually stabilise in the long run, 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 losses could 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 since it started operations. According to Neeraj Basur, chief financial officer, the company was able to maintain a no-exit-age policy as its products were appropriately priced and underwriting was done at the point of sale, rather than at the point of claim.

Industry sources revealed health insurers had requested the Life Insurance Council to discuss the issue with IRDA. Insurers had asked IRDA to consider their proposal of free-pricing of health insurance products. The final guidelines on health insurance are expected in few weeks.