According to a report by the Comptroller and Auditor General of India (CAG), all four public sector insurers suffered losses of Rs 26,364 crore in the health insurance portfolio over the past five years due to higher claims in group policies.
“PSU insurers’ health insurance losses have either wiped out/reduced profits from other industries or increased overall losses,” according to a CAG audit report recently submitted to parliament.
The total loss of the four PSU insurers – New India Assurance Company Limited (NIACL), United India Insurance Company Limited (UIICL), Oriental Insurance Company Limited (OICL) and National Insurance Company Limited (NICL) – amounted to Rs 26,364 crore during 2016 -17 to 2020-21.
Health insurance is the second largest branch of the PSU insurers (the first being motor insurance), with a gross direct premium of Rs 1,16,551 crore during the five years from 2016-17 to 2020-21.
The market share of PSU insurers in the health insurance industry is also continuously declining relative to standalone health insurers and private insurers, the report said.
The Comptroller and Auditor General of India (CAG) report states that the Ministry of Finance (September 2012/May 2013) has issued group policy underwriting guidelines according to which the combined ratio of standalone group policies should not exceed 95 percent and for group policies involving cross-subsidisation, the combined ratio may not exceed 100 percent.
“Audit noted that the Department’s guidelines were not being followed by the PSU insurers and that the combined ratio of the group health insurance segment as reported by PSU insurers ranged from 125-165 percent,” it said.
With regard to claims management, the report said, the IT systems in PSU insurers lacked proper validation checks and controls, undermining the smooth operation and reporting system.
This has resulted in due dates such as multiple settlement of claims, overpayment above the insured amount, overpayment due to ignoring the waiting period clause for specific diseases, non-application of the co-payment clause, exceeding the limit for specific diseases, incorrect assessment of admissible claim amount, irregular payments on implants, non-payment of interest on delayed settlement, etc.