SUCCOUR FOR SENIORS Insurers in fix over pricing health cover for 85-yr-olds

Mumbai: Insurance companies are in a dilemma over pricing health insurance policies for people over 85 years of age considering that there is no claims history for this group. 

    The need to introduce covers for this age has arisen because of new regulations that bar companies from having a maximum age for those who have been continuously buying insurance. There is also the likelihood that with the incidence of hospitalization rising with age, part of the burden may be passed on to younger buyers. 

    "The regulator has also brought personal accident and critical illness covers under health insurance. But these are benefit policies which provide a lump sum amount to make good a loss in earning. These covers may not be suited for older people for whom there is no income loss," said Shreeraj Deshpande, head of health insurance at Future Generali India. 

    According to T A Ramalingam, head of underwriting at Bajaj Allianz General Insurance, pricing policies for older people will be difficult since there is no data on the claims history. "We are asking our actuaries to start working on pricing policies for people up to 110 years of age since in future there will not be any exit age. While the number of people requiring hospitalization in that age group would be high, usually no major surgeries are performed on those above 85 years," he said. 

    While there may not be many high value claims, the frequency of hospitalization is expected to be very high in this age group which will push up the premium. But if even with high premium the claims ratio (the ratio of claims paid to premium) is more than 100% than other insurance buyers would end up subsidizing this group. 

    "If the higher cost is passed on to younger buyers, there could be a negative spiral with fewer young people buying insurance thereby pressurizing companies to raise rates further," said Deshpande. 

    Unlike life insurance where it is possible for insurers to sell long-term policies with "level" premium (paying the same amount over the years), non-life companies cannot sell 'level' premium policies. 

    One reason is that health covers do not provide fixed benefits; rather they make good the loss suffered by the insured in spending for treatment. 

    Health insurers say it is impossible to predict what will be the cost of health care after a few years. 

    "There are too many variables. Medical inflation itself is rising at 10-15% every year," said Ramalingam. 

    He added that companies also had to take a call on the extent to which they could increase premium for someone who claims consistently. In the new draft guidelines the regulator has said that if there is a claim insurance companies should reduce the cumulative bonus at the same rate at which it has accrued. Insurance companies can also continue with the bonus by charging a higher premium.