The vigil is significant at a time when the government is hard selling health insurance across the country, particularly for the poor. Mis-selling of health cover is a huge risk the government recognises, said an official aware of the developments. It is the first such concerted action in any insurance segment by the sector to act upon such data. A similar initiative in motor vehicles has yet to take shape.
“The insurance company shall share with the General Insurance Council the details of its investigations and such documents which provide documentary proof to consider a provider as having committed a fraud,” the letter from the GI Council, dated 12th July, notes.
The letter has been marked to all the 28 insurance companies licensed by the regulator in India that offer health cover. Of them, six, including large multinational insurance companies like Apollo Munich, Star and Cigna, exclusively provide health insurance.
On the basis of the data of such fraud, the secretary general of GI Council will form a screening committee with five members from the insurance companies. Once the red flag is raised against a particular hospital or other service provider, the cases will be referred to a health strategy group to be formed by the Council.
“We aim to discover patterns in such cases and share those with our members as an advisory protocol that will make it easier for them to blacklist the offenders,” said Chandrasekaran.
He said while the option of making a police case was open, they would rather avoid walking the route.
But R Srinivasan, former member of the Insurance Regulatory and Development Authority of India (Irdai), said he could not understand why the industry was reticent about making police complaints. “An individual would have problems pushing such a case, but it is necessary that companies do so,” he argued. “My worry is that this posturing should not lead to a demand to raise the rates on the health insurance,” he added.
Chandrasekaran, however, said stamping out frauds would ensure that the premiums would not rise for genuine policyholders as they would not have shared the cost of higher payouts.
The stakes are massive. For the latest reporting month of May 2017, general insurance premium has risen by 15.95 per cent, within which health insurance has risen by 13.1 per cent. Within them, the business of standalone health insurers have grown by 43.6 per cent. It is now the second-largest portfolio for insurers behind motor business. In the last financial year, the general insurance business grew at an astonishing 32.34 per cent (Rs 96,376.75 crore) with the specialised health insurance companies clocking a 41.11 per cent rise (Rs 4,152.67 crore).
As a top industry executive put it, this breakneck pace was powered by the spread of the group insurance cover. “It brings in bulk premium for the companies, for which they are willing to suffer losses of up to 90 per cent,” the official said. The environment for higher payout is endemic in the insurance cover offered, since many of the exclusions under the retail policies are discarded in these omnibus policies. “Alarm bells ring only when the loss crosses 100 per cent; the companies try to balance the books by investing in the debt market to make good the losses on premium,” the official added.
This is exactly the scare the finance ministry letter to the public sector companies paint. It has warned that the race to cut premiums for group health insurance must be stopped to ensure the companies make a turnaround. As of now only New India Assurance has been profitable. The former Irda member said since the state run general insurance companies had fewer checks at the underwriting level at the branches, the risks were proportionately higher. Irdai chief TS Vijayan was unavailable for comment.
The GI Council instruction which sets out a protocol for the industry to track frauds in the health insurance business does not differentiate between the state-run and private sector-run firms. The GI Council chief said the protocol was put in place as an earlier exercise to list fraud in insurance payout had found a high percentage of health insurance claims. “I would not say the percentage is rising, but there is a need to track them diligently now,” he said.
The government has made it attractive for large segments of Indian population to source health insurance at a subsidised rates. According to data on the government-run India Brand Equity Foundation, in FY16, 36 crore people had signed up for health insurance, approximately 30 per cent of India's total population. The number was 28.80 crore in FY15. An example is the Assam government’s Atal-Amrit Abhiyan scheme that offers a comprehensive cover for six disease groups to those with annual income of less than Rs 500,000. Insurers are rushing to bid for these projects at overall premiums that are not even one per cent of the total expected cost of claims.
The margins become a nightmare when nursing homes and others give fudged bills for treatment of disease.