Group health cover premium may rise 50%

New Delhi: The finance ministry's directive to public sector insurance companies to stop giving discounts on group health insurance policies could push the premium for such schemes by up to 50% of the existing rates if all expenses, as directed by the government, are factored into pricing the products.      The order, issued by the department of financial services to the chairmen and MDs of the four government insurers, says the strategy must be adopted with immediate effect. It seeks to stop discounts on any policy where the combined ratio is more than 100%. The combined ratio refers to the costs on an insurance claim, management expenses, commission to agents and third party administrators (TPAs) and other expenses that may have been incurred in servicing a policy. A study by the ministry found that the combined ratio, or the cost of a policy to the insurer, is in the range of 140%-165% on an average. As per the new order, the four PSUs—National Insurance Company, New India Assurance Oriental Insurance and United India Insurance Company—must bring this combined ratio down to 95%. The four command over 60% of India's health insurance business. In 2011-12, the total health insurance premium income of the four PSU firms was Rs 8,145 crore while the net combined loss was around Rs 1,500 crore (assuring a combined rate of 150%) to these firms. 'Govt order may benefit private insurance players'  New Delhi: The finance ministry ordering a halt to discounts on group health insurance policies, a senior official at a public sector insurance company said each of the four PSU insurance firms have issued directives to their field offices that "premium should be suitably loaded" to recover all expenses related to the policy.      While he said the increase in premium could be as high 50%, insurance experts said several factors would determine the actual hike. "The directive predominantly talks about group health insurance policies. Premiums may go up significantly for these schemes and marginally for retail policies. While the increase for group insurance premiums could be up to 35%, in case of individuals it is likely to be between 5%- 10%," said V Ramakrishna, chairman of India Insure Risk Management and Broking Service.      "This directive drastically reduces the choice available to group customers whose portfolio is healthy and the move is anti-free market," he added.      "Prices should be worked out taking into consideration the burning cost, management expenses and medical inflation to ensure that the premium is revised and that the combined ratio will be less than 95%. Such policies otherwise shall not be renewed," says the finance ministry directive.      "Any cartelization of this sort where prices are determined uniformly may result in the business shifting to the private sector where the management cost is at least 20% less in comparison to public sector insurers," the PSU company official said.