Indian corporate majors, which once serenaded employees with fat health insurance benefits, have now resorted to providing leaner perks. Rising healthcare and insurance costs and misuse of policies by employees are forcing them to pare these benefits.
Health insurance premiums have risen sharply by 40% over the last two years, according to industry estimates. This has driven corporates to slash health cover benefits for family members, which was standard practice earlier. Rampant and frivolous use of insurance policies by employees, such as going to exorbitant hospitals for routine illnesses has also been pushing renewal premiums up.
Companies have also resorted to imposing several restrictions such as limitations on illnesses covered, room rental caps, and co-payments on claims in order to control spiraling health insurance expenditure.
In fact, a study by a Pune-based health risk management firm?Vantage Insurance Brokers – has confirmed the trend. The study covering 127 top firms across industries such as IT, ITeS, BPO, manufacturing, banking, media, consulting and healthcare showed that more than half of the corporate houses had cut down on health benefits in 2009 and 40% were looking at doing so in the current year. Group health insurance contributes to close to 60% of the Rs 8,100 crore health insurance market in India.
Corporates like IT firm Symphony Services and insurance company ING Life India told FE that they are sitting tight on some of these benefits. An official from Symphony, on condition of anonymity, said his company has seen premiums rising 50-60% a year for the past two years forcing it to rethink on the perks. Kshitij Jain, managing director and chief executive ING Life India, said, ?We have introduced co-pay for our employees where 20% of the expense or claim is borne by the employee and the rest is taken care of by the company.?
The scene was quite different even two years ago. Back then it was a buyers’ market. Insurers were pushing group policies, at low or no profitability, and were not imposing large renewal hikes despite adverse claims ratios. Health insurance was sold along property insurance and was mostly cross subsidised since line-wise profitability was not the aim. After property insurance premiums plummeted, this cross-subsidy came under severe strain.
Insurance companies were left with no alternative but to increase prices in the group health insurance segment. “Most of the customer organisations, however, were not ready for such a scenario,” said TA Ramalingam, head ?Underwriting, Bajaj Allianz General Insurance.