The Finance Ministry has directed state-owned general insurers to put in place an appropriate mechanism for pricing group health cover, as this class of business has been reporting losses.
The mechanism is to take into account the existing incurred claim ratios, management expenses, medical inflation, commissions, likely increase in claims due to ageing, increase in size of the group and the cost of underwriting, reported The Times of India.
The advisory from the ministry is part of the various circulars on corporate governance, profitability and underwriting prudence that the government sends out from time to time.
State-owned National Insurance said it does have a pricing mechanism for its corporate health insurance products. "We always take into consideration the incurred loss experience of the past two-three years, cost of operations and the projected outgo in the coming year. The renewal pricing of each large employee benefit programme of corporates is always based on these broad parameters and then finalised in case to case negotiations," National Insurance Chairman Sanath Kumar said.
Oriental Insurance Chairman A V Girija Kumar said his company adopts careful underwriting of group health business, which is in line with commercial prudence. "Our approach of prudent underwriting is acknowledged in the market. So we're comfortable with guidelines since we are already following the same," he said.