TA Ramalingam explains that the company is focused on building business for the long term, even if it means taking on a little more risk

Bajaj Allianz General Insurance has had a good run with its product for senior citizens and lately it has even relaxed the tough underwriting conditions, even if it has meant taking on more risk. In an interview to Moneylife, TA Ramalingam, head-underwriting, Bajaj Allianz General Insurance, discussed the company's experiences that have led it to take a more balanced approach. Excerpts:

How is the business from Silver Health (senior citizen mediclaim)?

The product covers the age group from 46 to 75 years, with pre-existing covered up to 50% from second year of the policy. It is a medically underwritten product and hence the premium-to-claims ratio is good.

We are aware of the risks and what we are getting into for this product. The regular mediclaim (Health Guard) does not enforce medical test up to age 45 years unless there is some adverse declaration.

We see claims from regular mediclaim rising after the four years pre-existing disease (PED) waiting period. For example, a 40-year-old person without undergoing any medical test, may have claims after four years PED waiting period and increase the loss ratio.

Do you reject a lot of proposals for the senior citizen's product (Silver Health)?

Earlier, the underwriting was tough. We are now looking at the degree of illness. Like, what is the degree of hypertension, diabetes? We have to look at this from a long-term perspective, as people do renew mediclaim in 85% of the cases. If it is small risk over a period of time, we take it.

What we want to underwrite or not is under our purview. Ninety of the 100 cases will be good if properly done. If the illness is major, we may load the premium, or offer the policy with exclusion of the illness (tailor-made policy). But, only 10% will accept such exclusions.

Some insurers have strict underwriting for specific diseases like diabetes. What is your approach to underwriting?

Most Indians suffer from something. If we become extremely strict, the mediclaim portfolio will be dead. We have to give the benefit of the doubt to the customer by not being totally negative. We take a balanced approach to a certain extent and to our degree of comfort.

Somewhere, we also take a risk. Sometimes, the sum insured is low and we experiment. If we do 100% perfect underwriting we will loose business. We try new things. Sometimes we succeed, sometimes we do not. We have learned a lot by experience.

The process is constant feedback from the in-house claims processing team. Based on the claims experience and the rich data over the years, we refine the underwriting. A certain customer segment may have few claims that could lead to a trend of losses. It may be something we ignored or waived. We make a decision to go ahead or not in future so that it does not have adverse impact on the portfolio. We do a post-mortem of our decisions and take corrective measures. There are latest findings from medical journals and we will factor it in underwriting.

Why not enforce medical test for the regular mediclaim (Health Guard) scheme?

If we underwrite 200 policies per day, may be 50 have problems. If I make all 200 people go for a medical, it will handicap the marketing of the product. It will be considered too procedural when compared to competitors who may underwrite quickly.

With Silver Health (senior citizen product), customers are mentally prepared for a medical exam at the age of 45 years and above. If we find over the next one or two years that there is need to reduce the medical exam age (based on loss ratio), we may reduce it to 40 years or lower (Health Guard). Today, it has not reached the danger mark.

Is there any worry over the loss ratio?

We have to constantly monitor it. We have to attract new business to subsidise the loss ratio, else we will end up with an aging population on our books. We have to be fair to existing customers and continue their renewals as per product policy terms.