Page 172 - India Insurance Report 2023- BIMTECH

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covered for a substantial sum insured that too with negligible or nil contribution by themselves. Group
insurance schemes have also done what no advertisement did – spread health insurance awareness.
However, while group schemes brought cheer and positivity in an otherwise arid health insurance
market, it had their share of downsides.

6. Regulatory Interventions in Health Insurance

With health insurance, in particular, in the Group arena expanding rapidly and sometimes recklessly,
the Regulator stepped in whenever necessary to rectify the situation through appropriate Regulations,
Guidelines, and Advisories. The first step was to define ‘Group ‘to prevent adverse marketing trends
like multilevel marketing or groups being “formed” with a health insurance policy as the primary objective
by some sundry insurers and distributors. There were instances of designing policies for a group of two
or three members to obviate File and Use’s regulatory compliance. Apart from opaque terms and
conditions, there were mis-selling concerns in all such cases.

It was during the implementation of group schemes that the insurers found that managing the
various stakeholders like the insuring public (whose awareness was low and therefore could not accept
any denial of payments), hospitals (with challenges relating to infrastructure and billings), the expectation
of the Government etc. was overwhelming. And to top it all in a government scheme, certain States did
not remit premium payments to the Insurance company on time but expected prompt settlement of
claims. This had a telling effect on the insurers’ balance sheet, which led many insurers to walk away
from not only the government business but also certain corporate group businesses. However, an equal
number of insurers continued writing this business due to a compulsive obsession with topline and
market share. Here, too, low-quality underwriting on the part of insurers coupled with adverse selection
by customers (like choosing to cover their aged parents but not themselves, opting for cover when they
suspect it could lead to a medical procedure, etc.) led to underwriting losses to insurers which affected
the public sector insurers more as they wrote a sizeable chunk of this business.

The continuous monitoring by the regulator of the adverse claims ratio and its effect on the solvency
margin has resulted in better underwriting practices veering away from the perpetually loss-making
business. The Government, too, raised its concerns with the public sector insurers. The incurred claims
ratio, which was around 107% in 2017-18, came down to 105% in 2018-19 and to 99% in 2019-20.
Reference is not made to the years 2020-21, 2021-22 as the COVID pandemic had adversely impacted all
the insurers in this segment.

The bancassurance group schemes saw frequent changes in insurers. This led to fresh underwriting
every time a new insurer took over, resulting in changes in conditions, increase in premium and so on,
which prompted the regulator to step in. It was mandated that the existing insurer should offer a policy
to which the individual could migrate. Portability for individual policies was also allowed, thus enabling
the individual to port the policies to other insurers after migration.

Apart from damaging the balance sheet of insurers, the Group schemes have had adverse consequences
for the insurers and for the common man. The first one is that such schemes put the sale of individual
medical insurance on the backburner. Tremendous efforts were required to convert a prospective buyer to