The Hindu Business Line : Insurers are once bitten, twice shy

FACED with mounting claims from information technology companies, non-life insurers have suggested that liabilities be shared by the respective corporates.

Sources said the medical claims ratios from IT and IT-enabled services corporates were in excess of 150 per cent. The sources said that "employees in these organisations treated medical benefits as fringe benefits and an income source rather than a facility for a contingency and hence the high claims ration."

Besides, the sources said, till about a year, most insurers tolerated the high claims, since they were attempting to build business volumes in the sector. However, the focus had now shifted from business volumes to profits, the sources said.

Most insurers have group medical insurance arrangements with the IT companies, bundled with other general insurance covers such as fire and floods, where claims ratios were low. This, in turn, allowed them to cross-subsidise medical insurance covers. However, the insurers' ability to cross-subsidise has been severely dented, after the recent spate of natural calamities, sources said. The average claims ratio in these low loss portfolios is estimated at close to 70 per cent, up from about 40 per cent.

Consequently, the insurers, particularly the private sector, had begun tightening claims.

The sources said that using third party administrators was also not very effective. In addition, some private sector players have moved to set up in-house third-party administrators (TPAs). Bajaj Allianz General Insurance Company Ltd (BAGICL) has already set up an in-house TPA. Other private sector companies are also expected follow suit. Besides, the public sector companies have also begun a review of their existing arrangements with the TPAs, stung by the losses.

Some of the insurers such as BAGICL have taken the lead in containing medical claims. BAGICL's Regional Manager, Mr Srinivas Raju, said some discussions had taken place with the insurance companies for containing the claims. He added, "We would prefer that companies also share the liabilities." This was especially in the case of group medical covers. This, he said, would be a more effective mechanism in containing the claims ratios in the sector.

Unlike the private sector, public sector companies have not bundled the portfolios with other contracts. They have, instead, treated them as separate portfolios. However, they have now begun looking at the portfolios more closely and hiking premiums for some of the group covers, where the claims are high.

In addition, the sources said, insurers have taken up with the Centre and the Insurance Regulatory and Development Authority the issue of standardised billing for hospitals. This was because some of the private hospitals tended to inflate bills if patients were covered by medical insurance. This proposal, however, is still at the discussion stage. The alternative, the sources said, would be to limit the offering of group medical covers.

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