The insurance industry is reeling under losses, especially in the health insurance sector. Premiums have gone up—even covers are bound to shrink now as insurers try to shore up margins
The health insurance industry has been suffering as corporate healthcare is becoming an expensive business for insurers, with claims shooting up. Ergo, consumers will soon bear the brunt of higher premiums and stricter cover norms, while applying for a health insurance cover.
“The claims ratio in the health insurance sector has increased and this has made many insurance companies to jack up their premiums. Many companies are planning to reduce the add-ons they were planning to provide to their covers, for their upcoming products,” an official from a major insurance company said.
He added that the rising premiums and reduced covers are only meant to restrict some of the privileges policyholders received, so as to bring down losses and control the flow of cash.
The official added that these new products with increased premium and reduced covers will be introduced—somewhere between August and September—after approval from regulator Insurance Regulatory and Development Authority (IRDA).
Under the fresh (proposed) hospitalisation norms, stricter caps for hospital room rents are also on the cards. Also, the age limit for medical tests, which are conducted after the age of 40, would now be reduced to 35 years, the official said.
These changes in premiums and covers could be a considerable disadvantage for those who wish to buy a new health cover for themselves. However, the official said that these changes will only be seen in the new products that are proposed to be introduced.
“These moves, which are being planned, are clearly to reduce expenditure for insurers,” said the official.
According to Yogin Sabnis, a certified financial planner for VSK Financial Consultancy Services Pvt Ltd, policyholders would now have to insure themselves early.
As Moneylife has reported earlier (http://www.moneylife.in/article/8/5146.html), insurers are trying to cut out third-party administrators from the chain to improve customer service and cut costs.
Health insurance has turned out to be the fastest-growing segment in the business. However, the dramatic rise in health insurance premiums in the last few years has thrown households off-balance, and has also impacted companies severely. In most cases, the claims ratio in the corporate group health insurance segment is over 100%.
The insurance regulator has asked all insurance firms to offer a minimum sum assured on ULIPs if the policyholder expires. It has also extended the lock-in period to five years
The Insurance Regulatory and Development Authority (IRDA) has announced some sweeping changes to be implemented in the structure of unit-linked insurance plans (ULIPs), amidst the raging battle with the Securities and Exchange Board of India (SEBI) over the regulatory purview concerning ULIPs.
In what may be seen as a desperate attempt on the part of IRDA to shore up its defences prior to its court battle with SEBI, the insurance regulator has made life cover mandatory with ULIPs (including pension/annuity products), along with a minimum sum assured payable on death. This norm will come into effect from 1 July 2010.
ULIPs, which provide health insurance cover, will be required to provide death benefits. Loans will not be granted under ULIPs. Partial withdrawal will now be allowed only after the fifth year instead of the earlier three-year lock-in period, except for pension/annuity products.
Partial withdrawal in ULIP annuity/pension products will not be allowed and the insurers will have to convert accumulated fund value into an annuity at maturity. “However, the insured will have the option to commute up to a maximum of one-third of the accumulated value as lump sum at the time of maturity. In the case of surrender, only up to a maximum of one-third of the surrender value could be availed in lump sum and the remaining amount must be used to purchase an annuity,” stated the IRDA circular.
An official from Reliance Life Insurance believes that this is a good move from the public’s perspective and it will have only a marginal impact on the company. Another official from Bajaj Allianz Life Insurance said that only time would tell how much impact this move would have on the industry.
Every top-up (ULIP) premium will have a lock-in period of three years from the date of payment of that top-up premium. However, no top-up will be allowed during the last three years of the contract.
The move comes at a time when the matter is due to be heard in a court.
“ULIPs as a product are not bad. The problem is because they are being sold as short-term products with a long-term insurance cover. If somebody is buying a ULIP and staying invested in it throughout the year, then it is a very good product. People pay compulsorily in an endowment policy. I would say that ULIPs should be made like an endowment policy. If there is a longer lock-in period, then it is always better for the client,” said Yogin M Sabnis, MD, VSK Financial Consultancy Services Pvt Ltd.
“Insurers will benefit if people stay invested for a long time. The actual allocation of funds starts after three years. Unless the commission is reduced, churning will not stop. Agents will still churn after five years. There are other investment avenues where initial charges are low. Why should one invest in a ULIP?” asked Sandeep Chimanlal Vasa, chartered financial planner (CFP), Total Wealth Management.
The country had received around Rs2.34 lakh crore in remittances from Indian expatriates in the financial year 2008-09
Notwithstanding the global financial meltdown, India received a huge amount of Rs2.04 lakh crore in remittances during April-December 2009.
The country had received around Rs2.34 lakh crore in remittances from Indian expatriates in the financial year 2008-09.
Overseas Indian affairs minister Vayalar Ravi told the Lok Sabha that the country received $40,810 million (around Rs2,04,050 crore) during April to December 2009.
Remittances to India have been on the rise over the past few years and it has become one of the preferred destinations of global flow of remittances.
The minister said that in 2006-07, the country had got $30,835 million in remittances while the amount increased to $43,508 million in 2007-08.
The Gulf region accounts for an average of 27% of the total remittance inflows into India, with major source countries being the UAE and Saudi Arabia.
The Reserve Bank of India recently had said that North America continues to be the most important source of remittances to India despite its share in total remittances falling to 38% from 44% in 2006.