Friday, October 25, 2013

Public sector general insurers woo corporates by cutting premium rates.

State-owned general insurance companies have decided to cut premiums on group health insurance policies to attract corporates. The insurers are quoting premiums 10-15 percent below their claims ratio.
The four state-owned insurers are - United India Insurance, New India Assurance, Oriental Insurance and National Insurance. PSU general insurers together have 60-65 per cent share in group health insurance portfolio. Since the private sector insurers have also been tapping corporates, the difference in premium collection between the state-owned and private sector insurers has been deducing over the past few years, which made public sector insurers aggressive. Also, a recent finance ministry directive prohibited state-owned insurers bidding for each other's business to stop unfair competition among them.

Numerous private insurers are indulging in this practice just to attract corporate accounts. According to an industry official, “It is not a good practice for the industry. It a situation where we are trying to kill each other."

Another expert from the industry said that it is not sensible to offer discounts to large profitable firms, since they are capable of purchasing insurance without a subsidy. “Insurance is based on a common pool concept. If large players are being offered high subsidy, then others in the pool (retail customers) will have to compensate for it. So, in the long run, prices for individuals' health policies will go up,“ he added.

Since, heavy discounts are being offered to corporates by large insurers, smaller insurers are concentrating on retail segment. A senior official from a standalone health insurance company said, “We cannot match the rates offered by the large general insurers. Therefore, our only alternative is to build the retail segment where we can price appropriately."

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