Group insurance policies under Irda scanner

Insurance companies will soon have to provide details of the parameters adopted by them to define the group insurance policies to the Insurance Regulatory and Development Authority (Irda).

This would allow Irda to better regulate sales of group insurance products.

The General Insurance Council, meanwhile, has also decided to make it mandatory for all general insurance companies to share information of high-value group insurance exposure with other companies to cut down industry risk on such exposure. The insurance regulator has in recent times expressed concerns on many insurance companies quoting lower than ‘the risk’ premiums to achieve top line growth through aggressive selling of group insurance policies.

“Irda has put in place an administration process for group policies. This requires companies to submit quarterly data on various parameters, which determine the group products. Irda will heavily penalise the insurance companies which do not follow the required protocol,” said a senior Irda official.

Group policies provide insurance cover to a group of people in an organisation and the employer pays the premium. The group insurance category, especially health, has been traditionally a loss-making portfolio as there has been under-pricing of premiums by the insurers. The claim ratio is as high as 140 per cent.

As insurers get bulk business from group products, they charge lower premium. Irda official added, “Many insurance companies are ignoring risk parameters and are quoting very low premiums. They are doing so just to achieve top line growth and increase their market share. The insurance regulator is taking the issue seriously.” Group insurance is attractive business proposition for an insurance company as it helps them increase their overall market share with minimal operational expenses.

The General Insurance Council is also working with the non-life firms to ensure best practices for sale and premium calculation of group insurance products. “After discussion with general insurers, we have decided that all general insurers will share information amongst themselves. In case of premium of over Rs 50 lakh, the insurers will share information within the industry. In this way insurance companies will know the profile and the past claim ratio of the insured, and will be able to fix the premium accordingly,” said S L Mohan, secretary general, General Insurance Council.