Public sector insurance companies have started raising insurance premium and altering terms on policy renewals for senior citizens, while pandering to their corporate clients. By V.Jagannathan.

Chennai: Sixty-five year old Lakshmi was shocked to receive the mediclaim renewal notice from one of the public sector non-life insurers; the insurance company had, without any prior intimation, hiked her renewal premium by a whopping 100 per cent, because of her age! Health insurance premium is based on the age of the person and the value of the cover the policy holder chooses.

Ironically, the insurer gave her a cumulative bonus (coverage increase without additional cost) for not making a claim during the previous year. Although Lakshmi has had the policy for the past several years, she has never made a single claim till date.

When she inquired about the arbitrary hike, the insurer's attitude literally was "take it or leave it". Upset by the arrogant attitude, she approached other insurers who, too, turned down her application on grounds of her age and the "premium loading" mentioned in the renewal notice.

Finally, Lakshmi had no option but to pay the quantum increase in her premium to her existing insurer.

This poses a few questions:

• Are insurers justified in "loading" the basic premium at the time of renewing a policy just because of a person's age?
  
• Did the insurance companies obtain the Insurance Regulatory and Development Authority's (IRDA) permission for this at the time of launching the policy?

Insurers have to get the regulator's sanction before changing any of the policy or premium terms.

Even the prospectus issued by insurers doe not mention their "right" to load the basic premium in the product prospectus. In fact to protect policy holders, the IRDA has stopped public sector insurance companies from raising the minimum value of insurance from Rs15,000 to Rs50,000 per head without its prior approval.

The insurers normally load the basic rate in case of corporates, only if the claims ratio exceeds a certain percentage. On their part, corporates enjoy high discounts on the premium if the number of people covered exceeds a certain number. They also enjoy an additional facility called a "floater cover" for their employees' families.

Under this, instead of paying the premium on a per head basis, the insurers charge the rate applicable for the oldest member of an employee's family and cover all the others for a nominal extra payment, which could be around 20 per cent on the basic rate. As a result, an insurance cover for a specified sum floats over the entire family at a comparatively lower premium than for an individual.

While some private companies offer this benefit to individuals, the public sector insurers restrict the facility to their corporate clients.

According to industry officials, a mediclaim policy is an annual contract. An insurer can charge a higher premium at the time of renewing the policy, as this is treated as a new offer from the company and the policyholder can either accept it or reject it.

However, Anita D, complaints coordinator, Consumer Action Group, asserts, "Ethically such an attitude towards a long-standing customer is not right."

Meanwhile, the public sector companies are likely to relaunch their mediclaim insurance policy, capping the various expense heads. According to reports, the proposed policy would limit the room rent, doctor fees, medicines, etc, at a percentage of the sum insured.

The policy may also limit the overall claim to a figure below the amount of the policy value, say 90 per cent. Like some private players, the public sector companies are planning to increase the "no claim" waiting period from one year to two years or more for certain ailments like cataract, kidney stone and others.

Going back to old days
Nearly 15 years ago the four public sector insurance companies vended a product with various inner limits. There used to be couple of schemes with differing sum insured.

As it turned out to be tedious and customer-unfriendly, the companies devised the present scheme whereby a prospect chooses the sum insured, say, Rs1 lakh and pays the relevant premium based on his age. As there are no inner limits, policyholders are able to access quality hospitals without bothering about the details like the diagnostic charges and others.

However, insurers complain about the absence of any correlation between the premium paid and the type of room chosen. The diagnostic charges in hospitals vary according to the kind of hospital room a patient chooses to occupy, something which defies logic. Further, there is an unholy nexus between doctors, hospitals and the policy holders to cheat the insurers by inflating the bills, doctoring the medical reports and other methods.

Last fiscal the four government insurers earned Rs1,427 crore out of the total industry's Rs1,732 crore by way of premium through mediclaim policies, of which, they say the claims outgo was 127 per cent of the premium earned. It is not known whether the loss figure was arrived at after taking the investment income earned out of the mediclaim premium.

Hence, the government insurers want inner limits on expenses so that the policy holders bear some portion of their medical expenses. Already, companies like New India Assurance Company Limited and United India Insurance Company Limited are selling such policies in addition to the traditional mediclaim policies, which could now be revised.

Isn't this a customer unfriendly or a retrograde step at a time when IRDA and the government talk about spreading the message of health insurance? Under the proposed scheme, a policyholder has to find out the probable cost of treatment under various heads upfront with different hospitals before deciding to get admitted into one. This in turn hinders his choice of selecting the best hospital for admission.

"No," says G V Rao, an industry commentator. "The cost of health insurance policies with sub limits will be lower than what it is now. There is lot of cross-subsidisation in the health insurance segment - rural and semi-urban policy holders subsidise urban policy holders as the premium rates are uniform throughout the country. And between the individuals and the corporates, individual policy holders subsidise the latter."

According to another industry expert K N Bhandari, "Mediclaim policies without sub limits are premium products. The companies have to launch cheaper products."

Bajaj Allianz General Insurance Company Limited, among the private insurers, sells a health cover similar to the ones sold by the government companies. Says Kamesh Goyal, its CEO, "The health insurance policy is under-priced today as can be seen by the high loss ratio."

Interestingly, the insurance industry cries about losses in its mass product segments, like motor and healthcare insurance. Since insurance is based on large numbers, it would be logical to assume that the industry would see profits in the healthcare portfolio if it were to reduce rates and attract more policy holders?

Responds Goyal, "There is inflation. The rates charged by healthcare service providers like doctors and hospitals have increased drastically along with the cost of drugs. However, the insurers have not hiked their premium rates for a long time."

Interestingly, the web sites of the public sector insurers details the following healthcare insurance products offered by them:

Jan Arogya Bima from Oriental Insurance Company Limited
This policy provides for hospitalisation and domiciliary hospitalisation (Medical treatment at home) for a premium as low as Rs70 for a male or female adults and Rs50 for each dependent son / daughter not exceeding 25 years of age, with a policy cover of up to Rs5,000 per person per annum without any inner limits. This insurance is available to persons between the age of five years and 70 years. Children between the age of three months and five years can be covered provided one or both the parents are covered concurrently.

Uni Medicare Insurance from United India Insurance Company Limited
This is similar to the normal mediclaim insurance sold by the company but with inner limits of 0.5 per cent of the sum insured for room rent doctor's fees and cost of medicines and limited to 15 per cent of the sum insured per illness or injury.

Bhavishya Arogya Policy New India Assurance Company Limited
Bhavishya Arogya policy has been designed keeping an eye on medical needs of those above 55 years of age. For availing the benefit of this policy one has to take out the policy during the earning period of one's life. The earning phase of the insured person can be considered between the age of 25 years to 55 years so that the medical benefit of the policy can commence above the age of 55 years, which is considered as retirement age. The retirement age has to be selected by the insured at the time of taking the policy.

The minimum sum insured is Rs50,000, which can be increased by additional units prior to four years of the commencement of benefit by paying the additional premium.

Traffic Accident Insurance Policy National Insurance Company Limited
This is a personal accident and mediclaim combination insurance. The policy offers Rs1- lakh cover for a person for death or permanent total disability and hospitalisation in a rail road traffic accident.