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Competitive bidding for Modicare will lead to underquoting: Star Health CMD

Feb 08, 2018

Chennai: Private sector health insurer Star Health started its government backed insurance policies with Andhra Pradesh when YS Rajasekhara Reddy was the chief minister. It then signed up Tamil Nadu and managed the ambitious state government scheme. When AIADMK was elected to power in 2011, it was forced out as the government wanted a state owned insurer. Now, with Narendra Modi government announcing the largest medical insurance plan, by volume, in the world, V Jagannathan, CMD of Star Health says that pricing the policy and linking it to PDS (ration card) should be the starting point.

Excerpts: Star Health has vacated the government administered insurance space after starting it. Do you see yourself making a re-entry in that space?

We will surely enter in government sponsored insurance space. As regards Tamil Nadu, the restrictive tender to PSU companies made us not to participate. As regards Andhra Pradesh, the government has started administering the scheme by themselves through a trust.

The claims in government sponsored schemes are said to be very high making them unviable for private players. What is your suggestion for better claims management?

I do not agree with this. The profit depends on how the scheme is administered and the premium rate.

What do think should be the pricing of Modicare policies?

The pricing will be critical . I feel that a maximum of Rs 2000 for every family will be a good price for Modicare policy.

Based on your experience in AP and TN what are the areas that should be fortified before launching this (Modicare) program?

Treating Hospitals must enter into a tie up with insurers on rates agreed for each procedure. To check if hospitals are adhering to these rates, a robust vigilance set up will be necessary in addition to a well-developed IT system which will help in surveillance and analytics.

There are talks of use of Aadhaar for this rollout. Can you suggest the cheapest, yet effective rollout mechanism of this?

As Aadhaar does not give income level, ration cards (coloured cards currently in use ) for BPL families can form the basis for effective rollout of the scheme. For future use, a system should be ushered in to capture income level of a person in Aadhaar card.

Can you elaborate on the Ration Card over Aadhaar. How do you think this should work?

Aadhaar as of now does not provide for income limit. This will be an impediment to select the targeted coverage group. But the ration card provides the income limit.

Should other similar schemes like RSBY be subsumed by Modicare?

Yes. There should be one policy for all government funded insurance schemes. Multiple schemes will only add to the confusion besides bring in distractions.

Since the scale of the project is mammoth, do you suggest a consortium approach to effective roll out?

Each company can be earmarked some areas on a draw of lot basis so that selection can be avoided. If the process goes through bidding, under-quoting can happen and eventually the scheme may suffer.

Source: The Times of India

Budget 2018: Merger of 3 state-run insurers to ease pressure on pricing, say players

Feb 07, 2018

Intense competition among public sector general insurance companies is all set to abate with the government pushing for the merger of National Insurance Company, United India Assurance Company and Oriental India Insurance Company. And this, market participants believe might lead to an upward correction in premium rates, especially in the mediclaim segment for retail investors.

Finance minister Arun Jaitley, in his Budget speech on February 1, said that a merger of the three public sector general insurance companies into a single insurance entity, which will be listed, was on the cards. Senior officials in the industry suggest that the merger is likely to take effect in the next financial year. But market participants are hoping that premium rates might come down in a few segments even before this, as the three entities move to align.

Rakesh Goyal, director at Probus Insurance Brokers, says, “Competition will come down among the PSU insurers as they were competing with each other. There was, especially, huge competition in the small and medium enterprises (SME) insurance segment and this was taking a toll on their profitability. With the expected merger, this unfair competition might come down.” He also added that, there might be rates correction in retail mediclaim policies and rates might go up for group policies in health segment.

Insurance brokers in the group health insurance segment pointed out that the public sector insurers had been very aggressive on pricing and this was hurting premium collections across the industry. Incurred claim ratio in the health segment for public sector insurers surged last fiscal, shows the data from the Insurance Regulatory and Development Authority of India (Irdai). In its annual report for 2016-17, Irdai shares data that puts incurred claim ratio of public sector insurers at 120.15% against 115.45% in 2015-16. The ratio for private sector insurers was 74.70% and 74.69% for the years 2016-17 and 2015-16, respectively.

Incurred Claim Ratio is a ratio of the total value of claims paid or settled to the total premium collected in any given year. In the past even government had warned public sector general insurers on their huge underwriting losses. With the merging of the three insurers and consequent listing, market participants feel that there might be more prudent underwriting going forward.

Investors are also likely to frown on unhealthy numbers, thus exerting pressure to adopt more financially prudent pricing. Prabodh Thakker, chairman, Global Insurance Brokers said, “It’s the move in the right direction and it will bring quality practice rather than quantitative practice. Yes, unhealthy competition will be arrested in health and other segment as well.” In the year 2016-17, health was the second biggest segment in terms of premium underwritten by the general insurers after motor insurance. The data from Irdai shows that, 39% of the premium comes to motor insurance, while 27% of premium goes to health, with the remaining being drawn from others like fire and marine.

Source: The Financial Express

South India beats north in health insurance

Feb 06, 2018

Southern states like Andhra Pradesh, Tamil Nadu and Telangana, it seems, are more conscious about health. The government’s recent National Family Health Survey has found a huge gap between the southern and northern parts of the country in health insurance coverage.

It’s highest among states like Andhra Pradesh, Tamil Nadu and Telangana while Uttar Pradesh, Bihar and Assam are among states with very poor health insurance coverage. Andhra tops the list as 75 per cent families in the state are covered under health insurance while in Lakshadweep, Manipur and Jammu and Kashmir, less than 5 per cent families have health cover.

It also highlighted many health related issues where further improvement is required.

The survey said that in the 15-49 age bracket, only 20 per cent women and 23 per cent men are covered by health insurance.

The survey highlighted the poor condition of public healthcare system and revealed that people generally prefer private hospitals when family members fall ill. It said that while 51 per cent people preferred private healthcare, 45 per cent went for treatment at government and municipal hospitals.

As per the survey, the private sector is the primary source of healthcare in urban areas — 56 per cent. Even in rural areas, it was as high as 49 per cent. The public sector is the main source of healthcare for 42 per cent households in urban areas and 46 per cent in rural areas.

The use of government health facilities is highest in Uttar Pradesh (80%) and Bihar (78%) and lowest in Tripura (9%), the Andaman and Nicobar Islands (3%), and Lakshadweep (less than 1%).

The most commonly reported reason for not using government health facilities at the national level is the poor quality of care. The second most commonly reported reason is that no government facility is nearby, followed by the long waiting time at government facilities.

The survey asked women in the 15-49 age group about potential problems in obtaining medical treatment. About two-thirds (67%) of women reported at least one problem. While 25 per cent said money as a problem, 30 per cent cited distance to a health facility and 27 per cent cited transport.

Thirty-seven per cent of women also reported concerns that no female health provider was available. Forty-five percent of women said no provider was available and 46 per cent cited non-availability of drugs.

The survey said half of those with insurance are covered by a state health insurance scheme and over one-third by Rashtriya Swasthya Bima Yojana.

Source: New Indian Express

27-year-old cancer survivor from Mumbai gets insurance after 2 years

Feb 05, 2018

A 27-year-old bone cancer survivor from Borivli finally received his insurance cover from a nationalised medical insurance company, two years after it rejected his insurance claim for a prosthetic replacement surgery and withheld the balance amount.

The insurance ombudsman in the city instructed the company in July 2017 to pay the balance of Rs1.22 lakh with interest to the claimant, Narendra Shetty. The last due of the amount was paid in January. HT has a copy of the forum’s observations and verdict.

In May 2005, Shetty was diagnosed with Ewing’s Sarcoma, a type of bone cancer, following which he got a prosthetic implant on his right thigh. A decade later, although he was completely cancer free, his implant wore out. In January 2016, he had a new titanium prosthesis implanted. The surgery and hospitalisation cost him Rs5,90,000. He claimed the amount of his insurance cover within a week of his surgery, but the insurance company rejected it stating that “Ewing’s Sarcoma is a genetic disorder and genetic disorders are not payable.”

Doctors have said that it is common for insurance companies to reject claims on ‘inadmissable grounds.’ Dr Manish Agarwal, orthopaedic oncologist, PD Hinduja Hospital, who operated on Shetty, said, “It looks like they have a standard response ready, to reject claims on the most illogical bases.” Shetty wrote to the company, and attached the doctor’s letter which said “the surgery was conducted because the old implant had worn out and not to treat his cancer.” The letter also clarified that Ewing’s Sarcoma is not genetic.

After two months, the insurance officials agreed but paid only Rs1,50,000 and rejected the rest of the amount. Shetty then wrote to the chief managing director of the company. After the company kept rejecting the claim for over a year, he decided to approach the ombudsman.

In July 2017, the ombudsman forum heard both the parties and ruled in Shetty’s favour. It observed that Shetty was operated because his prosthesis had worn out, which had nothing to do with his cancer. “After a point, it was not really about the money, but a matter of principle,” Shetty said. “If I hadn’t fought now and needed a surgery again years later, they could have rejected the claim on the same grounds and I would not have been able to object it,” he said.

Source: Hindustan Times

A shot-in-the-arm for insurance players

Feb 02, 2018

The Centre’s flagship National Health Protection Scheme to cover over 10 crore poor families providing coverage up to ₹5 lakh, will benefit public insurers and certain private insurance players active in mass health programmes.

The Budget also proposes to merge three public sector general insurance companies — National Insurance Company Ltd, United India Assurance Company Limited and Oriental India Insurance Company — which will be listed sebsequently. This will bring down costs, improve scale and usher in greater competition in the space.

While clarity on the contours of the National Health Protection Scheme is awaited, industry players feel that it will be on the lines of the existing Rashtriya Swasthya Bima Yojana (RSBY).

Contours of health scheme

Under this, a beneficiary pays a premium of ₹30 for a ₹30,000 cover. The balance (about ₹370) is borne by the Centre and the State together. Insurance players will participate in the tender process for each state and the lowest bid is awarded the contract.

If the Centre’s new scheme is on similar lines, then a beneficiary may have to pay ₹500 for a ₹5 lakh cover.

The premium may work out cheaper as the probability of lower income households using up the full cover may be less. However, for players active in this space, this opens up big opportunity as the scheme gathers scale.

What for players

For public insurance players such as New India Assurance, United India, National and Oriental National and select private insurance players such as Reliance General, the Centre’s new health scheme offers immense opportunity. For Reliance General mass health forms about 44 per cent of total health GDPI (Gross Direct Premium Income).

That said, vagaries in the mass health business and unattractive pricing has seen other private players, turn cautious to this segment. Hence not all players may find it viable to bid for the Centre’s mega health protection scheme. For instance, in FY17 Reliance General was not appointed to provide policies under RSBY for the state of Kerala which impacted growth; overall health GDPI fell by a sharp 36 per cent in FY17.

Also sustainable benefits will flow in only when some of the existing issues are ironed out.

First, there must be smooth flow of subsidy without undue delay, both from the Centre and the State.

Next, claims settlement can be smoother only if more number of hospitals are empanelled which, given the segment these mass health programmes cater to, will be long-drawn. Of the ₹1,000 crore budgeted allocation to RSBY in FY-18, only ₹470 crore was used, according to revised estimates, clearly implying that scaling up such schemes will take time.

For FY-19, the Centre has allocated ₹2,000 crore for RSBY.

Sound move

New India Assurance was listed last year. But steep valuations and weak operating metrics have seen the stock trade way below its listing price of ₹800 (now at ₹667).

The Budget proposing to merge the remaining three public insurers is a sound move, as it will help them increase scale and cut costs.

In comparison to private players, public insurers have weak financials. Each of the three public insurers proposed to be merged have a steep combined ratio of 134-148 per cent (FY17). Combined ratio measures the incurred losses and expenses in relation to the total premiums. For top private general insurance players, such as ICICI Lombard, Bajaj Allianz and HDFC Ergo combined ratio is a much lower 97-104 per cent.

Source: The Hindu Business Line

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