According to a report by the Comptroller and Auditor General of India (CAG), all the four public sector insurance companies have incurred a loss of Rs 26,364 crore in the health insurance portfolio in the last five years due to excess claims in group policies.
“The loss of health insurance business of PSU insurers either eroded or reduced the profits of other lines of business or increased the total loss,” said an audit report of the CAG tabled in Parliament recently.
Four PSU insurance companies – New India Assurance Company Limited (NIACL), United India Insurance Company Limited (UICL), Oriental Insurance Company Limited (OICL) and National Insurance Company Limited (NICL) had a total loss of Rs 26,364 crore. From 2016-17 to 2020-21.
The health insurance business is the second largest line of business of PSU insurers (first motor insurance) with a gross direct premium of Rs 1,16,551 crore during the five years 2016-17 to 2020-21.
The report noted that the market share of PSU insurers in the health insurance business is also steadily declining as compared to stand-alone health insurers and private insurers.
The report of the Comptroller and Auditor General (CAG) of India stated that the Finance Ministry has laid down guidelines (September 2012/May 2013) for underwriting group policies, according to which the combined ratio of standalone group policies should not exceed 95 per cent. and cross-subsidised policies for the group, the combined ratio should not exceed 100 per cent.
“The audit observed that the Ministry’s guidelines were not complied with by the PSU insurers and the combined proportion of the group health insurance segment as reported by the PSU insurers ranged from 125-165 per cent,” it said.
With regard to claim management, the report said, IT systems in PSU insurance companies lack proper verification checks and controls, which undermines the smooth functioning and reporting system.
This has resulted in lapses like multiple settlement of claims, overpayment of Sum Assured, overpayment due to neglect of waiting period clause for specific diseases, non-applicability of co-payment clause, breach of capping limit for specific diseases . Incorrect valuation of admissible claim amount, irregular payment on transplant, non-payment of interest on delayed settlement etc.