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Rediff.com  » Business » Companies ask staff to pay part of health cover claims

Companies ask staff to pay part of health cover claims

By Shilpy Sinha in Mumbai
June 08, 2009 12:48 IST
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In what may lead to some price correction in the health insurance business, many companies are now asking employees covered under group health policies to pay around 10 per cent, on average, of the total claim.

The move, by many mid-sized and small companies, to ask their employees to bear a part of the total claim has often been initiated on suggestions from insurers, industry sources said.

According to industry estimates, in the case of group health policies the claim ratio (what insurance companies have to pay to what they earn as premium income) is around 140 per cent, making the business unviable. Insurers said the move would improve matters and premium rates have also gone up by 5-10 per cent.

"With companies opting for co-payment, it will lead to managing costs optimally. They will be conscious of the cost incurred. It was necessary to introduce such measures to control costs," said ICICI Lombard's Head of Health, Sanjay Dutta.

"Over the last two months we have seen companies asking employees to bear a part of the claim. Employees will become more responsible and will rather prefer reasonable hospitals," added Optima Insurance Brokers' managing director and chief executive officer Rahul Agarwal.

Since companies can neither cut the benefits nor pay high premium, they are asking employees to pay part of the claim. "Going forward, employees will utilise the medical cost judiciously and will not overuse health services," said Bajaj Allianz General Insurance Head of Health Shriraj Deshpande.

With low margins and a high claims ratio, insurers were finding it difficult to underwrite fresh health business, company executives said.

Before rates were set free from control, insurance companies used to cross-subsidise group health policies with fire policies. But after the first phase of 'detariffing', insurers had to bear heavy discounts in the fire segment, of up to 80 per cent. Now, companies are pursuing a policy where each segment of the general insurance business has to be profitable and are bringing an end to cross-subsidisation.

In 2008-09, of the Rs 31,000 crore (Rs 310 billion) premium income for general insurance companies, nearly 40 per cent or around Rs 12,000 crore (Rs 120 billion) came from the health segment.

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Shilpy Sinha in Mumbai
Source: source
 

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