Group Health in Corporate India today- An Opportunity?
A nightmare posing a unique opportunity for professionals managing their organizations health insurance program.
I have seen many online discussion groups where HR professionals have genuinely expressed their queries about the Group Health Program (GHP) benefit. GHP is also commonly referred to as Group Mediclaim or GMC. While some businesses are exploring this option, employees of others judiciously enjoy its benefits; however some face serious cost escalations due to the prevalent syndrome of underwriting logic overshadowing competition.
This recession has resulted in two major impacts on the decisions that HR managers handling Group Health are making: lower employee expectation and high claims ratios.
In the earlier competition regime it was relatively easy for businesses to pay GMC premiums which were far from commensurate with their very high claim ratios. So, companies with claims ratios more than 200% managed to pay GMC premiums at the same( or even lower) than they paid last year. That's when competition became unhealthy not just for insurers but also for the businesses which thus far lavishly enjoyed from it.
This ‘pool’ is drying out.
For insurers their bleeding portfolios resulted in serious senior management initiatives including a crack down on loss making GMC policies. As you read this article, a CAG audit is underway at various Insurance Public Sector Units (PSU.) GMC policies with adverse claims ratios are the primary target. Senior officials are being taken to task. For businesses PSU Insurers were the last avenue which would quote premiums significantly lower than actual GMC claims.
Prudent underwriting the norm of the day.
Now most PSU insurers would expect a minimum of actual claims payout plus brokerage/ commission plus service tax. Many are ready for such an arrangement only if the businesses agree to place all their other insurances with it. With discounts up to 85% (on tariff) being offered for asset policies and other premiums being similarly wafer insurance officials are finding it increasingly difficult to justify to their management the low GMC premium quotes, which they were forced to give due to increased competition on the market coupled with internal premium targets.
The time seems to have arrived.
Advisors to the industry have been sounding off their clients over the last few years that this trend had to happen in ‘2-3 years’. Some judicious businesses did a review of their insurance portfolios and successfully adjusted their premium outflows vis-à-vis actual claims, over the ‘2-3 years’ period, their insurance managers are at peace. Albeit, others decided to benefit from the competition scenario till the time had arrived. Some even stretched the system to the extent that they could safely put a heading titled ‘Profit from Insurance’ under the income from other sources category in their financial statements.
Another loop hole gets plugged.
For businesses the lower premium base resulted in ballooning claims ratios that now stare them in their face waiting to burst. For example, a company that paid an average of Rs.1 million per year towards GHP premium and claimed an average of Rs.30 million per year will now have to pay more than Rs. 40 million to get their employees a group health care cover. Well, they managed the earlier lower premiums with the promise of so called ‘non-loss making’ premium or rotating their insurance portfolio amongst insurers which were ready to take losses for the sake of premium targets. Some even went to the extent of releasing wrong lower claims ratios to prospect insurers. Today, existing insurers have started getting claims information directly from the Third Party Administrators (TPA) that have handled the respective businesses GHP portfolio. What’s more they are sharing details on the actual claims with other insurers at which they have contacts. Basically, their trying to create transparency in the market so insurers, especially PSUs , can quote realistic premiums based on real claims data
Most insurance advisors did advise their business clients on this impending change but went on to negotiate for their clients phenomenally low premiums available due to severe competition the industry faced. Insurers in a bid to rapidly ramp up volumes lapped up loss making business and then went down the prudent underwriting path. Sadly, the vicious circle did not stop with prudent underwriting decisions of respective insurers: each would take their own turn at writing loss making business because of volume pressures.
The opportunity.
So is group health becoming a problem area for businesses? Charles Pinto, Chief Executive, GlobalInsure, feels otherwise: “At GlobalInsure, we see this upcoming trend, as an opportunity and are partnering with our business clients to unlock it. Just as the recession has made our businesses into leaner fighting machines the new scenario in Group Health here in India has brought about a positive long term change in the segment, increasing efficiencies and maturity along the way. Its something that we were always aware would happen but for some, it just did not want to put it on their to-do list”.
He goes on to explain “The good news for businesses t is hat this trend coincides with lower expectations of employees which had skyrocketed during the boom period. With lower pressure to retain employees, employee benefits are being restructured to realistic levels, one such benefit is GHP.”
Through a research based approach, GlobalInsure is currently working with businesses to restructure their GHP so that businesses can afford to continue to extend this benefit to their employees. Two methods being used are, a tweaking of benefits offered and at no extra cost to the company, additional benefits being offered to employees. Does the later sound possible? “Not only has our We Care solution helped businesses significantly reduce their claims ratio and thus their premium outflow it has made additional benefits not available to employees now possible, that too without any additional cost to company. All this in a tweak or two.”
So there you go even dark clouds have silver lining whilst grey skies a rainbow. With a little help, claims ratios, high GHP premiums, and most importantly employee morale can be safely managed through a ‘tweak or two’.
From India, Mumbai
A nightmare posing a unique opportunity for professionals managing their organizations health insurance program.
I have seen many online discussion groups where HR professionals have genuinely expressed their queries about the Group Health Program (GHP) benefit. GHP is also commonly referred to as Group Mediclaim or GMC. While some businesses are exploring this option, employees of others judiciously enjoy its benefits; however some face serious cost escalations due to the prevalent syndrome of underwriting logic overshadowing competition.
This recession has resulted in two major impacts on the decisions that HR managers handling Group Health are making: lower employee expectation and high claims ratios.
In the earlier competition regime it was relatively easy for businesses to pay GMC premiums which were far from commensurate with their very high claim ratios. So, companies with claims ratios more than 200% managed to pay GMC premiums at the same( or even lower) than they paid last year. That's when competition became unhealthy not just for insurers but also for the businesses which thus far lavishly enjoyed from it.
This ‘pool’ is drying out.
For insurers their bleeding portfolios resulted in serious senior management initiatives including a crack down on loss making GMC policies. As you read this article, a CAG audit is underway at various Insurance Public Sector Units (PSU.) GMC policies with adverse claims ratios are the primary target. Senior officials are being taken to task. For businesses PSU Insurers were the last avenue which would quote premiums significantly lower than actual GMC claims.
Prudent underwriting the norm of the day.
Now most PSU insurers would expect a minimum of actual claims payout plus brokerage/ commission plus service tax. Many are ready for such an arrangement only if the businesses agree to place all their other insurances with it. With discounts up to 85% (on tariff) being offered for asset policies and other premiums being similarly wafer insurance officials are finding it increasingly difficult to justify to their management the low GMC premium quotes, which they were forced to give due to increased competition on the market coupled with internal premium targets.
The time seems to have arrived.
Advisors to the industry have been sounding off their clients over the last few years that this trend had to happen in ‘2-3 years’. Some judicious businesses did a review of their insurance portfolios and successfully adjusted their premium outflows vis-à-vis actual claims, over the ‘2-3 years’ period, their insurance managers are at peace. Albeit, others decided to benefit from the competition scenario till the time had arrived. Some even stretched the system to the extent that they could safely put a heading titled ‘Profit from Insurance’ under the income from other sources category in their financial statements.
Another loop hole gets plugged.
For businesses the lower premium base resulted in ballooning claims ratios that now stare them in their face waiting to burst. For example, a company that paid an average of Rs.1 million per year towards GHP premium and claimed an average of Rs.30 million per year will now have to pay more than Rs. 40 million to get their employees a group health care cover. Well, they managed the earlier lower premiums with the promise of so called ‘non-loss making’ premium or rotating their insurance portfolio amongst insurers which were ready to take losses for the sake of premium targets. Some even went to the extent of releasing wrong lower claims ratios to prospect insurers. Today, existing insurers have started getting claims information directly from the Third Party Administrators (TPA) that have handled the respective businesses GHP portfolio. What’s more they are sharing details on the actual claims with other insurers at which they have contacts. Basically, their trying to create transparency in the market so insurers, especially PSUs , can quote realistic premiums based on real claims data
Most insurance advisors did advise their business clients on this impending change but went on to negotiate for their clients phenomenally low premiums available due to severe competition the industry faced. Insurers in a bid to rapidly ramp up volumes lapped up loss making business and then went down the prudent underwriting path. Sadly, the vicious circle did not stop with prudent underwriting decisions of respective insurers: each would take their own turn at writing loss making business because of volume pressures.
The opportunity.
So is group health becoming a problem area for businesses? Charles Pinto, Chief Executive, GlobalInsure, feels otherwise: “At GlobalInsure, we see this upcoming trend, as an opportunity and are partnering with our business clients to unlock it. Just as the recession has made our businesses into leaner fighting machines the new scenario in Group Health here in India has brought about a positive long term change in the segment, increasing efficiencies and maturity along the way. Its something that we were always aware would happen but for some, it just did not want to put it on their to-do list”.
He goes on to explain “The good news for businesses t is hat this trend coincides with lower expectations of employees which had skyrocketed during the boom period. With lower pressure to retain employees, employee benefits are being restructured to realistic levels, one such benefit is GHP.”
Through a research based approach, GlobalInsure is currently working with businesses to restructure their GHP so that businesses can afford to continue to extend this benefit to their employees. Two methods being used are, a tweaking of benefits offered and at no extra cost to the company, additional benefits being offered to employees. Does the later sound possible? “Not only has our We Care solution helped businesses significantly reduce their claims ratio and thus their premium outflow it has made additional benefits not available to employees now possible, that too without any additional cost to company. All this in a tweak or two.”
So there you go even dark clouds have silver lining whilst grey skies a rainbow. With a little help, claims ratios, high GHP premiums, and most importantly employee morale can be safely managed through a ‘tweak or two’.
From India, Mumbai
Hi! Thanks for the post. It's nice & informative. I think it's good to have group insurance as on one side it's cheaper than single insurance & on other side it provides health care to whole of the group or family. Have been searching for tutorials on how to plan for insurance according to my budget and needs... This tool came in handy too! Enjoy :) <link no longer exists - removed>
From India, Bikaner
From India, Bikaner
Your most welcome. Your free to contact GlobalInsure for your needs by emailing at corporate @ globalinsure. biz. While on the topic of Group Health Insurance most people feel that only businesses can take it, which is so untrue. Any group which was formed not simply for the purpose of insurance can benefit. Such as, societies, trusts, colonies, clubs, associations of all types.
From India, Mumbai
From India, Mumbai
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