All four public sector insurers incurred losses of Rs 26,364 crore in the health insurance portfolio for the last five years due to higher claims in group policies, according to a report from the Comptroller and Auditor General of India (CAG).
“The losses of the health insurance business of PSU insurers either wiped out/ decreased the profits of other lines of business or increased the overall losses,” an audit report by CAG tabled in Parliament recently said.
The aggregate 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) — was Rs 26,364 crore during 2016-17 to 2020-21.
The health insurance business is the second largest line of business of the PSU insurers (the first being motor insurance), having a gross direct premium of Rs 1,16,551 crore during the five years from 2016-17 to 2020-21.
PSU insurers’ market share in the health insurance business is also reducing continuously vis-a-vis the stand-alone health insurers and private insurers, the report observed.
The Comptroller and Auditor General of India (CAG) report said the finance ministry laid down (September 2012/May 2013) guidelines for the underwriting of group policies as per which the combined ratio of standalone group policies shall not exceed 95 per cent and for group policies involving cross-subsidy, the combined ratio shall not exceed 100 per cent.
“Audit noticed that the ministry guidelines were not complied with by the PSU insurers and the combined ratio of group health insurance segment as reported by PSU insurers ranged from 125–165 per cent,” it said.
With regard to claim management, the report said, the IT systems in PSU insurers lacked appropriate validation checks and controls, undermining the smooth functioning and reporting system.
This has resulted in lapses such as multiple settlement of claims, excess payment over and above the sum insured, excess payments due to ignoring the waiting period clause for specific diseases, non-application of co-payment clause, breaching of capping limit for specific diseases, incorrect assessment of admissible claim amount, irregular payments on implants, non-payment of interest on delayed settlement etc.