Medical insurers tighten cost levers

BANGALORE: Faced with the challenge of rising costs, players in the Indian medical insurance market are tightening various cost levers to ensure continued profitability. Room rentals have dropped to as low as 1% of the sum insured over 2008, a move many in the industry say will have a direct impact on the cost of hospitalisation over the medium-to-long term.

This review comes after many insurance companies began re-examining medical insurance products as “group healthcare” policies to corporates are proving to be a drain leading to huge losses. Earlier, employees in many corporates used to avail the facilities under these policies even for minor ailments that did not necessitate extensive medical care.

This has led many insurance companies to resort to retail sales. According to an official with Oriental Insurance, the company is actively pursuing retail health insurance and not chasing corporate accounts. “Health insurance continues to be a focus as this accounts for nearly a third of our business but we have brought in innovations, like floater covers,” he said.

Insurers, including major PSUs, are sweetening the deal by offering incentives, such as floaters (where the unused sum insured can be used by the person who is hospitalised).

“Health insurance is one of the areas of concern for general insurance companies as the claim ratio is often over 100%. We are moving towards greater control to ensure this portfolio doesn’t bleed,” a senior National Insurance official said.

“Insurance companies and third-party administrators are now keeping a stricter ceiling on treatment rates, beyond which the insured have to pay out of their own pocket. They are also encouraging the insured to visit medium-sized hospitals instead of large corporate hospitals to bring down costs,” Jayashsree Prasad, senior manager at health management and consulting company People Health, said.

The finer print has become more important than the product itself, said insurance retailers. “Reliance General Insurance has said that the health policy for individuals cannot be issued starting March 2009. This means that the floater policy has been made mandatory. Reliance has also increased the minimum sum insured to Rs 3 lakh from Rs 1 lakh,” Sridhar AN, manager finance and customer care at Artha Health Options, said.

Sources: The Economic Times