If insurance firms base their decision to renew premiums on claims, then senior persons and others with severe illnesses would suffer: GoDigit CEO

If insurance firms base their decision to renew premiums on claims, then senior persons and others with severe illnesses would suffer: GoDigit CEO

Senior citizen 

Certain health insurance providers have suggested implementing group-based pricing, which is akin to the removal of claims-based loading by the regulator IRDAI in 2013. According to Kamesh Goyal, this idea is morally repugnant and utterly nonsensical.

The surrender fee draft and group-based health insurance pricing, two significant proposals from the regulator and independent health insurers, respectively, are now the subject of intense discussion among life and health insurers.

In a rare interview with Moneycontrol, Kamesh Goyal, Chairman of the Godigit Group of Insurance Companies, criticized the industry's position on both plans, branding them as anti-policyholder positions. (The industry is against the IRDAI's plan to guarantee clients get larger surrender payments.)

His criticism of the plan to reinstate claims-based loading was very harsh. Goyal called this "horrible," adding that no regulator in the world permits giving the allegations any kind of weight. Citing legal requirements, he refrained from commenting on the goals of his firm or the impending GoDigit IPO. Revised passages:

You have made a lot of noise about how policyholders would benefit from IRDAI's plan for greater surrender values. Some of your coworkers are not in the same circumstances as you.

According to the research, even for the top businesses, there is really less stability—roughly 50%—if the premium payment term is longer than five years. A consumer receives nothing if they don't pay the premium for a period of three years.

When you consider it that way, 90 percent of the families would have experienced financial loss if they had purchased a subpar coverage within the previous ten years, let's say. Additionally, almost the whole commission is in front. This product is not long-term in nature, in essence. The type of loss that it is creating is incomprehensible from the perspective of the client.

Since their primary responsibility is to act in the best interests of the client, I think IRDAI will not be impacted and they shouldn't be. We also have no issue with these standards, as I already said. I have complete faith that this will accelerate progress.

All these changes will also hurt us. Actually, since our costs will increase throughout the first five years, our lives will be much more challenging. As a consequence, every surrender would incur enormous financial damages. However, what will happen to our sector if we are unable to provide them with high-quality products?

See also: Industry calls on IRDAI to ease proposed high surrender value standards amid protests from life insurers

Which product categories will policyholders be interested in?

Even now, if you purchase a single-premium insurance in the non-par category, you will get a 7–7.5 percent assured return. Depending on your tax bracket, fixed deposits will guarantee a return of 5.1–5.5 percent after taxes.

Why is the industry not selling single-premium plans now? This is a result of their very little administration costs. Executives at insurance companies demand large offices, excellent pay, vacations abroad, and holidays. Who is going to cover the cost? The consumer is ultimately responsible for paying for it. It seems that while your items are of high quality, the management is not motivated to market them.

Group-based pricing for health insurance coverage is a concept that some insurers have proposed. IRDAI phased away the previous iteration of this method, known as claims-based loading. What made the decision to bring it back?

Let's assume that throughout a five-year period, 30% of individuals have made claims and 70% have not. The premiums for non-claimants will rise in tandem with health inflation. Next, there are those who are submitting claims. People with significant illnesses such as cancer, liver or renal difficulties, or any other condition are likely to file a claim annually or every other year. According to the group-based pricing proposal, this means that if the premium rate is now, let's say, 5%, it will eventually rise to 20–25% percent. Such policyholders may have to pay an annual premium of Rs 2-3 lakh over a ten-year period for a cover of Rs 5 lakh.

Therefore, (if the proposition passes) the whole purpose of insurance will be gone. Those folks won't be able to afford insurance when they leave the insurance coverage region. As a result, the premium rates for those submitting claims would rise, which will benefit the corporations financially. As it stands, the second set of clients has no claims. Thus, the legislation would guarantee that, in the event of your illness, the industry would essentially discard you if you are elderly and experiencing a chronic condition. Is this what justice demands?

Because it makes sense to divide the risk among a small number of people rather than the whole population, no health insurance regulation in the world permits weighing of claims. However, the industry pays a premium for such individuals.intends to raise rates for those who do not file claims and then dramatically raise rates for those who do. A 20 percent loss ratio is what you (the insurer) want to deal with. How fair or reasonable is this?

So why did some insurers develop this proposal?

Rather of catering to consumer preferences, the business really aspires to become more customer-friendly. This plan for group-based pricing is appalling.

I find lobbying as a whole to be bothersome since most CEOs only remain for two, three, or four years. What about those who have been involved with the company for a long time? These individuals have nothing to do with consumers since they are attempting to safeguard their own interests. In my opinion, the number of lives (covered) in the health sector has not increased since COVID-19; instead, annual premium increases are being made.

Additionally, those over 55 now pay a premium of Rs 40,000–60,000 for a Rs 3–4 lakh coverage. In three to four years, if they are correct, it will rise to Rs 2 lakh (based on the group-based pricing model). This, in my view, is morally repugnant and totally nonsensical.

Two of the biggest issues facing insurance firms are poor health portfolios (particularly on the corporate/group side) and rising healthcare expenses. However, concerns from policyholders include renewal premium hikes that are high, even prohibitive. Is this riddle solved somewhere?

Indeed, there is. Take a look at the retail health loss ratios of stand-alone health insurance providers. The majority of them have a loss ratio of less than 70%, which is extremely excellent. Additionally, the group health loss ratio is at least 100%. Who purchases group health insurance now? big businesses. Do they want premium subsidies from retail health customers? Consumers of retail health are also consumers of group health. How sensible is this? Therefore, given that the retail health industry is lucrative, why extend and exacerbate the lives of these customers?

Hospitals charge more, according to insurers.

Indeed, there is still work to be done. The General Insurance Council seems to be making some moves, in my opinion. However, we are speaking about the group's health loss, not retail's, when we argue that health is a loss-making venture. However, since individual consumers have little voice, the industry wants to take action on retail health. And by choosing a large company and paying for its group health insurance costs, everyone is content to lose money. What does it signify?

These significant premium increases specifically affect senior people. Additionally, they have trouble porting rules when other businesses reject their suggestions. Is their issue resolved in any way?

In my opinion, the regulator need to specify the annual percentage rise in premium. Many businesses locate candidates while they are a bit younger. After three or four years, they realize they have nowhere to go, so they begin raising the prices. To ensure that premium increases are reasonable, the regulator must set a three-year ceiling on increases in individual health insurance.

Furthermore, insurance firms increasingly engage in the practice of attracting new clients at a discount and raising premiums thereafter. The regulator will have to step in if insurers are not acting responsibly.

What can be done to stop middlemen, particularly banks, from pushing their clients into high-commission insurance policies and loan-related goods that aren't appropriate?

Consequently, it is illegal to provide loan-linked insurance in the majority of wealthy nations. Why did the major nations discontinue it if it was such a beneficial practice? A regulation, for instance, prohibits banks in South Korea from awarding one insurance firm more than 25 percent of their business. The notion is that a certain amount of competition should exist. There is always an option for the client. If you follow these two procedures, ninety percent of misselling will cease.

Which three major developments do you anticipate over the next two years in the general and health insurance markets?

The regulatory body intends to implement many measures aimed at curbing misrepresentation and enhancing product usability. Second, thanks in large part to Nate-Cat (natural catastrophe) occurrences and the fact that third party premium rates have not changed, the general insurance market has been very profitable. In the next year, prices and commissions ought to become better.

Thirdly, I think life products need to become much more consumer-friendly if the market is to expand. I believe that pressure to become more open and provide better services will come from the government, regulators, and both the life and general insurance companies.