Corporate India has paid 50 per cent (around Rs 600 crore) more on group health insurance this year. The premium paid on this account last year was Rs 1,200 crore (Rs 12 billion).
Insurance industry executives said group health insurance, which has a high claims ratio of 120 to 150 per cent, was being offered at unviable premium until last year. But the situation has changed this year after the lifting of price controls from January.
This year's renewals showed some early signs of an end to cross subsidisation, especially for group health, they said. This has also meant that companies paid around 40-50 per cent less on property policies.
Under the earlier tariff regime, health insurance cover was being offered at a negligible premium rate if the ticket size for fire and engineering policies was large enough.
Fire and engineering insurance, which was giving huge profits, was being used for cross-subsidising group health and marine transit so that risks underwritten were profitable on a client basis.
M Ramadoss, chairman and managing director of Oriental Insurance Company, said, "in cases where there was a cross subsidy and the loss ratio was over 120 per cent, we have increased the group mediclaim rates by 40 to 50 per cent." The IT, ITES and engineering companies have seen the maximum increase.
However, the increase in premium rates for marine transit, which has a high claims ratio of 100 per cent has not gone up across the board. The increase in this case depends on the clients' claim history, Ramadoss added.
Sandeep Bakhshi, MD and CEO of ICICI Lombard General Insurance, said this year's corporate renewals witnessed a partial correction in rates.
Sanjay Kedia, managing director of Marsh India (a leading broker with 400 corporate clients), "there is a resistance to continue with cross-subsidisation in areas like health and marine cargo programmes where the losses are running in excess of 100 per cent."Greg Johnson, executive vice president (corporate broking) of Aon Global, however, said the rise in premium rates for group health and marine transit policies has stayed relatively low in many cases as insurers are still keen to maintain or grow market share.