The insurance regulator has said that it will penalize insurance companies that accept group health covers at a loss as these losses are ultimately subsidized by individual health insurance buyers.MUMBAI: Group health insurance will become more expensive for companies where hospitalization claims from employees exceed the premium paid. The insurance regulator has said that it will penalize insurance companies that accept group health covers at a loss as these losses are ultimately subsidized by individual health insurance buyers. The regulator has also asked insurance companies to come up with savings-linked health insurance plan so that individual buyers do not see a spike in rates as they age.At present, large companies with loss-making group health covers continue to escape rate hikes by shopping for new insurers. The chase to build up top-line growth has resulted in health insurers willing to accept business even if there is little likelihood of generating a profit. According to the Insurance Regulatory and Development Authority (IRDA), insurance companies cite these high losses to raise rates for individual policies where the buyer does not have the bargaining power.
"We have seen cases where insurers are quoting rates below their burning cost. Since insurance business is nothing but pooling of resources, it is clear that if group premiums are inadequate, they are being subsidized by someone else," said IRDA chairman T S Vijayan in his address at a health insurance summit organized by the National Insurance Academy in Mumbai. Burning cost is a measure used to calculate the extent of premium required to cover claim payments. In health insurance, trends in claims under a group policy usually do not vary year to year and pricing is, therefore, based on burning costs.
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