In an interview to Moneylife, Dr Damien Marmion says the insurance regulator needs to be flexible in approving premium increases, to reduce the delay and allow consumers decide what is the right and wrong premium

Give us your views on premiums and medical inflation.
Inflation is rising, hospital salaries and other costs are up. Hospitals cannot keep operating at these costs. Process efficiency and shorter stays for patients will reduce costs. Customers from every segment are also using medical facilities more frequently today. These reasons will increase medical premiums. Many insurers hold premiums for a few years and then increase them steeply; it is better to have a smooth annual increase in premium. The Indian market needs to get used to annual premium increase—even though we would like to hold it (down) as much as possible. Insurers should work on improving operational efficiency.

Reliance General had gone in for a hefty increase in mediclaim premiums after three years.
It is not just about companies, the Insurance Regulatory and Development Authority (IRDA) needs to be flexible in approving premium increases.

What exactly do you mean by ‘IRDA needs to be flexible’?
Apollo Munich is increasing premiums from 1 April 2011. I think they filed for premium revision one year back. It takes a long time to get approval for price revisions. It is about the mindset, not intentional delay, of IRDA. They need to look at the loss ratio and operating costs. IRDA should look at the financials of the company; the product needs to be signed off by the company appointed actuary. We believe that premium pricing is the consumer’s domain, not IRDA’s. Let the consumer decide what is the right and wrong premium. If some insurer wants a policy with outrageous premium like Rs10 crore, the consumer will automatically reject it.

Did you face any issues in your product approvals?
We are a new company and, hence, there is some dispensation as products need to come through.

How much is your business in group insurance? PSU insurers have suffered big losses.  
We have just started the group insurance business. After de-tariffication (and subsequent premium wars), PSU insurers had improper due diligence (for group insurance) and pricing issues. IRDA has taken a strong view. I know one example where a company had paid Rs1.50 crore in premium. Medical bills for the year reimbursed by the insurer was Rs3 crore. The insurer came back next year and offered the same premium of Rs1.50 crore. It is like taking the money out of the PSU insurer and putting it into the company taking insurance. The problem with the business of insurance is not bad risk, but bad pricing. Things are changing now. Group premium rates are going up, but the benefits are also coming down. Co-payments are increasing and parents may not be covered. We offer cover for parents as an option in group insurance.

Did IRDA consult insurers on health insurance portability?
They did not consult us; I don’t know about others. There are a lot of discussions happening right now in the General Insurance Council’s working group. Portability is not the solution to consumer complaints.

What is the main complaint from consumers?
The main complaint in health insurance is claim payment. We do underwriting at point-of-sale and not at point-of-claim. The due diligence—medical history check—is done at the time of underwriting. It may involve a medical test to ascertain pre-existing diseases (PED) as well as a detailed form to be filled up by the customer. Many insurers do PED investigation only when the claim comes and then reject the claim. This is a point of pain for customers. The insurer is trying to manage its risk. IRDA is there to manage consumer interests. The regulations that IRDA can lay down to handle consumer complaints are important.

Some medical conditions may not be discovered by a medical test. The customer may lie; the agent may fill the form. Your comments?
You cannot set up a business with the assumption that everyone is fraudulent. We have had only a couple of hundred claims until now, but they don’t have any specific pattern. We have not come across a fraudulent policyholder (regarding PED), but have found fraudulent bills. We give a welcome call to customers to go through all policy details and medical conditions to get confirmation. We offer a 15-day free-look period after issuing a policy (it is not mandatory).

Star Health has come out with a product with an 11-month PED waiting period. It has a senior citizen plan covering all PED from the second year.
It’s a good innovation in the market. We will have to see if they have got the pricing right and the risks that can come through. It is easier for large insurers, as they have a bigger pool to work on.

But Star Health is not a big insurer.
They have big business in the Rashtriya Swasthya Bima Yojna (RSBY) and other government schemes.

What about RSBY? You do have a product for the rural market.
We do want to bid for RSBY, but there are restrictions like being in business for a couple of years and company having revenues. It’s a shame, are we less able to deal with this than other insurers? We have low premium micro-insurance products for the rural market targeting the below-poverty-line segment. We are working with six NGOs and a couple of state governments.

Are RSBY and government schemes more for social obligation or profits?
RSBY is not very profitable. Star Health has shown that if done in a large enough way, it can be profitable. I believe more than 40% of ICICI Lombard’s business is from the rural market. They are not doing it for charity.

Many life insurers also have health products. Is that added competition?
It is a small part, yet important. About 15% to 20% of health insurance comes from a life insurance company. The benefit plan to indemnity (reimbursement) is an unknown factor for health insurance portability. The critical illness plan is not a substitute for mediclaim. It is an add-on.

You will complete one year of operations in the next few days. How do you see the policy renewal ratio? How do you see growth in the health insurance sector?
General insurance will show strongest growth (35%) in India. As a start-up, just 11 months old, we will be growing fast, but we have a long way to go. Up to December 2010, we had covered 40,000 lives and we collected premium of Rs15 crore. We have offices in nine cities; a couple more will be added. We have sold policies in 400 cities. Our survey shows that 74% of our customers have rated us ‘good’. We expect 70% of customers to renew which is more than the industry average of 60%. We are offering health benefits instead of no-claim-bonus to our customers—up to 10% of the policy value. There will be discounts for pharmacy, health check-up, gymnasiums and so on.

Will online policies carry discounts?
They will be at the same price. It will be another channel, apart from brokers, direct sales force, third-party distributors and in-house tele-sales.

How does your cashless facility work?
We have 760 hospitals for cashless facility. In half of these, we have done quality checks. We don’t have any third-party administrators. We don’t need 24-hour notifications, but the sooner, the better. We have 24x7 customer care to help the process. Our ‘Gold’ and ‘Platinum’ policyholders have a doctor as a relationship manager.

Tell us about your international medical emergency product.
It is for those travelling for business outside of India up to 180 days in a year. It is not travel insurance; it is a mediclaim for India and abroad. Bupa has built up a global network of 5,000 hospitals and medical consultants across 190 countries where direct payment of all hospital bills is done. For other hospitals, it will be on a reimbursement basis.