The Insurance Regulatory and Development Authority (IRDA) has reduced the reserve requirement for unexpired risk (URR) amount in case of health insurance for non-life insurance companies.
Until now,in case of health insurance business,non-life insurance companies had to set aside 50 per cent of the gross premium received every year till the valuation date (March 31) to meet any kind of risks. We have proposed 1/365 method for the calculation of reserve for unexpected risks in case of health insurance. This is a better way of calculation and would allow proper exposure to risk by the general insurance companies, said R Kannan,member (actuary),IRDA. With the new norms,insurance companies will have to set aside lower capital to take care of unexpired risks.
The move is expected to help companies that are de-growing in the health insurance business. With the new norms,such companies will have to set aside lower reserves compared with the 50 per cent requirement stipulated earlier.
With this,IRDA is allowing a one-time concession to companies which have not achieved minimum volumes from having to lock in additional reserves even when the business is not there, said Shreeraj Deshpande,health insurance (head),Bajaj Allianz General Insurance. This method of calculation is,however,applicable only for this financial year.