Health insurance premium hike hits elderly
As Firms Raised Rates In Tandem, Pensioners Left With No Alternatives But To Pay Nearly Double
Rema Nagarajan & Rachel Chitra TNN
This month, Kolkatabased Mr Soubito Banerjee and his wife, who are in their 70s, saw their medical insurance premium almost double from ₹32,000 to ₹63,000. Chennaibased Annathai Gopalakrishnan, 68, will pay ₹58,000, up from ₹29,000. In general, a health insurance cover of just ₹5 lakh for a 65-year-old couple now costs ₹84,000 per annum, as against ₹54,000 five years ago.
For many senior citizens living on a pension, the increase is stiff. At their age they cannot switch to another insurer, and a switch is pointless because the companies have raised rates in tandem.
One big reason for the increase is the withdrawal of the 15% discount on the premium for no claims. There was also a family discount of 10%, available to at least two members seeking cover. Together, that accounted for a significant 25% discount on the premium. These discounts were stopped by insurance companies last year after IRDA ruled in 2013 that those who had made a claim could not be charged higher premiums.
Though the discounts have been withdrawn for everyone, seniors take a larger hit because premiums rise with age. “My client has been paying insurance premium for more than 30 years. He used to be careful, paying small hospital bills from his own pocket to maintain the no-claim status,” a health insurance agent told TOI. That strategy will no longer work.
G Srinivasan, CMD of New India Assurance Company, says insurers face losses of 300% in the senior citizen category.
“The primary cause is medical inflation. Hospitals have no regulator, but we do. We are forced to increase prices for our viability.”
“Another reason is that IRDA allows us to increase prices only once every three years. Our last price revision was in 2012,” added Srinivasan, “we’d still be making losses in this (senior citizen) portfolio. We’d have to increase the prices even more drastically if we want to break even.”
V R Sehgal (name changed) is a worried man. The 57-year-old currently pays ₹43,500 per annum for the ₹5-lakh health cover he bought for himself and his wife 25 years ago. After retirement when his income will fall to about ₹20,000 per month, he will need to pay about ₹60,000 per annum till the age of 65, and more than ₹84,000 afterwards.
Data from Insurance Regulatory and Development Authority (IRDA) shows group health insurance provided to businesses is the most expensive segment for insurers (see graphic). Corporate employees’ claims actually amount to more than what they pay as premiums while individual insurance payers claim the least. In effect, individual policyholders are subsidising corporate — and to a lesser extent government — group insurance schemes. Yet, group businesses continue to get discounted premiums.
IRDA’s annual report for 2015-16 shows the net corporate insurance claims ratio (ICR — lower is better for insurer) in health insurance steadily rose from 100% in 2011-12 to 120% in 2015-16. The net ICR for individual insurance declined from 85% to 77% in the same period, before the price increase and the stoppage of discounts. The ratio for individuals now is likely to be even lower.
As Firms Raised Rates In Tandem, Pensioners Left With No Alternatives But To Pay Nearly Double
Rema Nagarajan & Rachel Chitra TNN
This month, Kolkatabased Mr Soubito Banerjee and his wife, who are in their 70s, saw their medical insurance premium almost double from ₹32,000 to ₹63,000. Chennaibased Annathai Gopalakrishnan, 68, will pay ₹58,000, up from ₹29,000. In general, a health insurance cover of just ₹5 lakh for a 65-year-old couple now costs ₹84,000 per annum, as against ₹54,000 five years ago.
For many senior citizens living on a pension, the increase is stiff. At their age they cannot switch to another insurer, and a switch is pointless because the companies have raised rates in tandem.
One big reason for the increase is the withdrawal of the 15% discount on the premium for no claims. There was also a family discount of 10%, available to at least two members seeking cover. Together, that accounted for a significant 25% discount on the premium. These discounts were stopped by insurance companies last year after IRDA ruled in 2013 that those who had made a claim could not be charged higher premiums.
Though the discounts have been withdrawn for everyone, seniors take a larger hit because premiums rise with age. “My client has been paying insurance premium for more than 30 years. He used to be careful, paying small hospital bills from his own pocket to maintain the no-claim status,” a health insurance agent told TOI. That strategy will no longer work.
G Srinivasan, CMD of New India Assurance Company, says insurers face losses of 300% in the senior citizen category.
“The primary cause is medical inflation. Hospitals have no regulator, but we do. We are forced to increase prices for our viability.”
“Another reason is that IRDA allows us to increase prices only once every three years. Our last price revision was in 2012,” added Srinivasan, “we’d still be making losses in this (senior citizen) portfolio. We’d have to increase the prices even more drastically if we want to break even.”
V R Sehgal (name changed) is a worried man. The 57-year-old currently pays ₹43,500 per annum for the ₹5-lakh health cover he bought for himself and his wife 25 years ago. After retirement when his income will fall to about ₹20,000 per month, he will need to pay about ₹60,000 per annum till the age of 65, and more than ₹84,000 afterwards.
Data from Insurance Regulatory and Development Authority (IRDA) shows group health insurance provided to businesses is the most expensive segment for insurers (see graphic). Corporate employees’ claims actually amount to more than what they pay as premiums while individual insurance payers claim the least. In effect, individual policyholders are subsidising corporate — and to a lesser extent government — group insurance schemes. Yet, group businesses continue to get discounted premiums.
IRDA’s annual report for 2015-16 shows the net corporate insurance claims ratio (ICR — lower is better for insurer) in health insurance steadily rose from 100% in 2011-12 to 120% in 2015-16. The net ICR for individual insurance declined from 85% to 77% in the same period, before the price increase and the stoppage of discounts. The ratio for individuals now is likely to be even lower.
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