Medical inflation of 14% fuels rise in health policy premium: Sumit Bohra, President, Insurance Brokers Association of India

There’s a general complaint that insurance companies are jacking up premium on health insurance exorbitantly every year. Why is it happening? Should there be a ceiling on premium hike?

The hike in the premium is linked to claims. The medical inflation is on the rise and current inflation is around 14 per cent which further fuels the hike in the premium. I would like the premiums to be capped but the same cannot be done unless the hospitals are regulated.

Health cover bill paid out by 20 private insurers is between 55-80% of the claimed amount according to data from IBAI. Can you explain?

There are two columns in IBAI claims hand book — one representing the number of claims settled in terms of numbers and second is the number of claims settled in terms of value. The 55-80 per cent claims settled in terms of values means the smaller claims are settled faster and the larger value claims may take time due to various reasons like higher scrutiny, more details required from hospitals and customers etc. It nowhere represents that the claims are short settled.

Govt has proposed 100 per cent FDI in insurance. Do you think it will have a big impact in the insurance sector if the law is passed? What kind of FDI is expected?

Definitely, it will create a huge impact. Allowing 100 per cent FDI will lead to increased competition, enhanced innovation, economic growth, improved accessibility and more transparency among the insurers and allow the customers more freedom of choice and better service.

There’s a proposal to allow one composite licence for all types of insurance activities in the segment. Will it benefit consumers or insurers?

A composite license will allow the insurers to cross sell and upsell new products to their customer thereby reducing the cost of acquisition. Life insurers, especially, will be in a better position to underwrite health as they have the underwriting data of the policyholder and will be better placed to underwrite the health risk. This move will benefit both the insurers and the customer.

Govt has proposed that insurance agents can do services for multiple insurers instead of the current restriction of one insurer. How will it impact the sector?

An agent represents insurer and representing multiple insurers would not be correct. If someone wants to represent multiple insurers then they should upgrade themselves to either an IMF (insurance marketing firm) or an insurance broker and follow the same set of compliance.

How will Bima Sugam impact the insurance segment? Why is it getting delayed?

Bima Sugam will help the whole ecosystem to transact quickly with full transparency and given an opportunity to the customer to compare, buy get serviced through the portal thereby reducing TAT and providing better service at a competitive price. Insurance is complex in nature and it will definitely take some time to create the platform as there are more than 50 insurers which needs to be integrated with different products. The regulator has already selected the CEO and the work is in full swing to launch the same by April next year.

There is a proposal before GST council for reduction/ abolition of GST on health and term insurance. What’s your view? Do you think it should be extended to the entire insurance sector?

This is a good move and if it happens, the burden on the common man can be reduced, especially on the senior citizens who are paying a high premium which is in the range of 10-15 per cent of the sum insured. In fact, post the new tax regime most of the tax payers don’t get rebate under Section 80D and 80C. Hence, waiver of GST will be a big relief and can further lead to increased penetration due reduction in price.