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Life insurers gearing up to enter health insurance segment
Venkatachari Jagannathan
20 November 2007

Chennai: The entry of Life Insurance Corporation of India (LIC) with an ambitious target of Rs5,000 crore within three months has kindled the interests of other life insurers to look at health insurance segment in serious earnest. (See LIC targets Rs5000 crore from health insurance).

Says P Nandagopal, CEO, Reliance Life Insurance Company Limited, “We are looking at the health insurance segment seriously.”

Adds S V Mony, secretary general, Life Insurance Council of India, “More and more companies are interested in coming out with a health insurance product.”

Except for the two leading private life insurers, Bajaj Allianz Life Insurance Company Limited, with its Care First policy, and ICICI Prudential Life Insurance Company Limited with its Crisis Cover and Hospital Care policies, no other life insurer has a product that could be termed as health insurance product.

 

Almost all the life insurers have “me-too” critical illness policies under which a lump sum is paid to the policyholder on the diagnosis of a listed ailment.

According to R Ramakrishnan, a consulting actuary, life insurers are better placed to propagate the message of health insurance than non-life insurers.

“Non-lifeinsurers are content with targeting corporates for business, whereas life insurance agents approach individuals for selling policies.”

Says Nandagopal, “Health insurance is actually a distribution game and life insurers are adept at it.”

That apart, life insurers have a vested interest in keeping their policyholders healthy and alive, so as to reduce their death claims; and a health insurance policy would be an insurance policy for the life insurers.

Additionally, they can also capture the morbidity data efficiently, which the non-life insurers have not been able to do so for the past several years.

According to Mony, life insurers can get a better mix of policyholders – children, youth, middle-aged, and even senior citizens – to have a better portfolio, unlike non-life insurers who typically get only middle-aged claim-prone people as clients.

Agreeing to that, K S Gopalakrishnan, chief financial officer, Aegon Religare Life Insurance Company Limited, and an experienced actuary, says, “A health insurance product will be a de-risking strategy for domestic life insurers. Today, the entire Indian life insurance industry is riding on the unit linked insurance products. Any fall in the stock market would severely impact life insurers.”

What he says is true. It may be recalled that Aviva Life Insurance Company Pvt Limited was depending solely on actuarial funded products. With the Insurance Regulatory and Development Authority (IRDA) banning actuarial funded products, the company now finds itself in a tight spot, as it has to come out with a suite of products, and fast.

For the insuring public, life insurers are a better bet when it comes to health insurance as the policies are usually long term in nature. Presently, non-life insurers refuse to renew policies once a claim is lodged, or if they sense a possibility of a claim in the near future.

However, industry officials say there is no regulatory hurdle for life insurers to get into the health insurance segment in a big way, by launching a healthcare reimbursement policy. The only hurdle they face is the moral hazard of the players involved in the entire healthcare chain – patients / policyholders, doctors, hospitals, laboratories and others.

“If there is a fraud bureau that would act fast in punishing fraudsters, then the insurance industry and the insuring public would be benefited,” says Ramakrishnan.

Citing the case of Janashakthi Insurance, a Sri Lankan life insurance company, he says, “The Company offers health insurance reimbursement cover as a rider to the life insurance policy. The basic policy period is for 20 years. After the maturity of the life insurance policy, the health insurance policy continues.”

If a health cover is given as a rider to a life insurance policy, a policyholder can get tax deductions for life insurance premiums and health insurance premiums under the relevant sections of the Indian Income Tax act. The one worrying aspect for life insurers in coming out with a long term health insurance reimbursement product, is factoring the inflation in their premium calculations.

Meanwhile, the entry of life insurers in what was earlier purely their domain, is a cause of worry for non-life insurers, and more so for the specialised stand alone health insurers.

Says V Jagannathan, chairman and managing director, Star Health and Allied Insurance Company Limited, “The threat is serious, and we are gearing ourselves up to meet the new competition.”

Ramakrishnan feels non-life insurers can partner with life insurers for this business.

“The life insurer can reinsure their entire health insurance portfolio with a domestic non-life insurer,” he adds.

Kamesh Goyal, CEO, Bajaj Allianz Life is of the view that non-life insurers will not be impacted much because of life insurers getting into health insurance segment.

send this article to a friend“Nearly 60 per cent of non-life insurer’s health insurance business comes from corporates with whom they have better relationship,” he remarks.

Meanwhile it is learnt IRDA has recently asked LIC to clarify some points relating to the product.

LIC officials are confident of satisfying IRDA and launch the health insurance product as planned.

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Life insurers gearing up to enter health insurance segment