Should premium be calculated on completed age or running age?

Should premium be calculated on completed age or running age basis?

Most of the Insurance Companies take completed age in calculating premium.

On Aug 16, 2007 New India Assurance Company Ltd. had switched over from completed age to running age concept.

At present this type of information is not advertised in the form of a statutory ad therefore no one comes to know about this.

Mr. B K Shah, a medical practitioner for Mumbai realized the difference due to change over at the time of renewal of his policy and took up matter with New India.

Rucha has written a nice news story on this in Times Business of May 16 and it is as follows;

Insurance firms calculate running age for premium

Senior citizens, who are already grappling with steep premium rate hikes, have yet another reason to be miffed with the controversial health insurance sector. In what could perhaps be a first instance of its kind, last year, a public sector insurer started calculating and charging premium on the basis of an insurance applicant’s running age, against the normal practice of completed age.

Mumbai’s B K Shah, himself a medical practitioner, discovered this when he applied for his Mediclaim policy renewal. “In a nutshell,” says Shah, “When I went for renewal at the New India Assurance Company in October, the policy showed up my age as 74, although it should have been 73....I was told that they had introduced a ‘running age’ concept.” Shah says he thus had to shell out a higher loading (increase) on the premium than if his actual age were taken into account. He paid Rs. 700 extra. “With this additional amount, my renewal premium rose to a total of Rs. 23,052 last year from Rs. 11,053 in 2006.” Subsequently, Shah made a right to information (RTI) application, which confirmed the company had shifted to this structure since August 16, 2007, “as a corporate decision”. Bimalendu Chakrabarti, CMD at New India Assurance, corroborates this development. The RTI document assured that as and when the policy was due for renewal, policyholders would be intimated along with premium calculation. Shah denies receiving any such intimation. The document also mentioned that “the product” was approved by the sectoral watchdog – Insurance Regulatory Development Authority of India (Irda). Shah now approached the Irda to verify the claim. “I received a ridiculous reply that the method of calculating age is an internal underwriting issue to be decided by the concerned insurer.” In the absence of Irda chairman C S Rao, who retired earlier this week, a detailed discussion on the subject was not possible. However, an Irda official admits that the regulator has not issued specific instructions in this regard. “Most companies follow (the concept of) completed age and one follows running age…Companies’ policies are disclosed in their documents.”
Another official adds, “In a detariffed market, the premium has to be decided by the insurance company.”
The ombudsman’s office too washes its hands of the issue. “This is not an area of dispute. We don’t look at issues such as age. We come into the picture only when a claim is denied.” says an official. Blaming this laxity for the situation, K S (Kaka) Samant, general secretary at the General Insurance Pensioners’ Association, Western Zone, says: “Since the Irda has not taken any objection, it is taken as a sign of approval.” The consumer organizations TOI spoke to said this was a case of commercial considerations overriding logic. As Mumbai activist Jehangir Gai asks, “Would someone who is 17 and running 18 be allowed to vote?”
Shah also made RTI requests to other public sector general insurers – Oriental Insurance Company, United India Insurance Company and National Insurance Company. They charge premium according to the applicant’s actual age.

Our comments:

1. If all the Insurance Companies are following one definition/norm then why did New India decide to go it for new definition?

2. Should Insurance companies advertise in the form of a statutory ad so that customers as well as insurance intermediaries are made aware of this type of change?


Your feedback will be appreciated.

Punjab, Uttrakhand and Bihar also to cover health insurance of poor families

It is nice to know that more and more poor families are being covered under health insurance policies being issued by state governments and Insuarnce co's.

The contracts have recently been awarded by these states;

Punjab - New India Assurance co. Ltd.
Uttrakhand - United India Insurance Co. Ltd
Bihar - Oriental India Insurance Co. Ltd

The states which have already implemented this policy are Rajasthan, Haryana and Delhi. According to our information these states and concerned insurance co’s have started distribution of smart cards.

Bids are expected from the following states in the coming month or so;
Chhattisgarh
Goa
Gujarat
Jharkhand
Karnataka
Kerala
Maharashtra
Orissa
Tamil Nadu
Uttar Pradesh
West Bengal

The states where Indian Government is giving 90% subsidy are;

All North Eastern states
Jammu & Kashmir.


Mr. Anil Swarup, director general of labour welfare in the ministry of labour and the official in charge of implementing the scheme, said: “We are still in talks with Andhra & Madhya Pradesh governments, who have not taken steps for implementation of this scheme. We understand there are issues over committing 25% towards the premium. Andhra Pradesh already has a health insurance scheme. These states will not be covered in the first year.”

CT will offer coverage to high risk small businesses

Connecticut’s latest health insurance bill has now passed the state Senate and is expected to be signed by the Governor. The approval vote came late last night and today’s news is filled with praise for the “outstanding accomplishments” of the legislators. The new bill presents an entirely different approach to health insurance reform.

The law allows local municipal government employees and small businesses to join the state employee’s health insurance pool. Premiums are already about $2,000 per month for family coverage, (vs. a national average of about $1,200 for comparable coverage in large firms). Certainly this is not what we consider “affordable” but this is apparently far less than some CT municipalities are now paying for health insurance! Few small businesses could afford this coverage. Those that could foot the bill will cover only the owners or key employees. There is no economic reason to suggest that small businesses would use the plan to cover rank and file employees. Small businesses tend to pay far less for employee health benefits than larger firms and municipal governments.

The problem is that those who understand insurance principles realize that adverse selection under the new law will now drive the premium rates up in a spiral effect. That is ALWAYS the economic effect of opening up a guaranteed issue health plan to additional applicants on a voluntary basis. The state will now be effectively subsidizing the health care costs of local municipalities and the rlativley few affluent small business owners who have significant medical costs. The first may be commendable – but who would have expected the second result? Eventually the cost of coverage under this Connecticut insurance plan will be HIGHER than any other state's employee cost but LOWER than any other high risk insurance pool. It will be a highly effective method to distribute health care costs of a few among all the state's taxpayers.

Open enrollment health insurance pools are certainly not a new concept. This is the approach used in most states to cover high risk individuals despite the clear indications that those who need the insurance most can not afford it. Most states use open enrollment health insurance pools as a "last resort" coverage under federal HIPAA law for those who cannot find more afordable coverage. Connecticut's plan to combine the open enrollment plan with the taxpayer-funded state employees' health coverage is an interesting new approach.

Is the single payer issue dead?

The tide of public opinion about our nation’s health care woes has taken a sharp turn over the past two months. The movement to blame commercial health insurance – as exemplified in Michael Moore’s “Sicko” movie - has lost wind. While the health care problems remain exactly the same as before, fewer people are willing to blame health insurance companies. We still pay way too much for health care for less than ideal care. The prognosis remains that the problem will get worse before it gets better. But apparently we are beginning to realize that commercial health insurance system is more likely to be part of the solution rather than the root cause of the problem.

Support for an open market commercial competition in the health care business has increased. Most of the current legislative proposals for health care reform on a national and state level now incorporate the use of private health insurance companies.

Those who endorse a government controlled single payer health care system are outraged. Socialist-minded reformers have noticed the change and express frustration in many online publications this week. Some Americans hope for a single payer government-controlled health care system. One blogger titled his column “What’s Going On?” and expressed disgust with the sudden trend toward his state politician’s recent endorsement of commercial health insurance solutions. Another lawmaker in Oklahoma defended himself from attacks by health care reformers by taking a hard stance that proposed measures to expand coverage would simply be too expensive to justify the support of his constituents. On a national level, McCain’s health care proposals, previously regarded are tired and boring, are applauded by mainstream media this week.

So why are we seeing this sudden change in direction? Much of the change in attitude is attributable to the explosion of myths surrounding commercial health insurance. Three of the most popular myths about commercial health insurance companies are:
1 - The profits of health insurance companies boost our overall health care costs.
2 - Private insurance is more expensive than public insurance.
3- Commercial insurance practices are not in the public interest.

See http://www.slate.com/id/2190273/ We will likely see much more on this topic.

Contradiction between definition of a family

The Sixth Central Pay Commission (CPC) in its report has said, “Presently, the definition of family for the purposes of LTC includes parents and/or stepmother residing with and wholly dependent on the Government employee. Stepfathers residing with and wholly dependent on the Government employee are denied the benefit available to similarly placed stepmothers. The definition also places an unreasonable restriction in such of those cases where parents, despite not having any source of income and being totally dependent on the Government employees, continue to live in the native place. The parent in such cases are denied the option to travel to the place of posting of the Government official under LTC. The Commission, therefore, recommends that parents and/ or step parents (stepmother and stepfather) who are wholly dependent on the Government employee shall be included in the definition of family for the purpose of LTC irrespective of whether they are residing with the Government employee or not”.
The Sixth CPC has further said, “The definition of dependency is being linked to the minimum family pension for all purposes. Accordingly, all parents and/or step parents whose total income from all sources is less than the minimum family pension prescribed in Central Government and dearness relief thereon would be included in the definition of family for this purpose. The extant conditions in respect of other relations included in the family including married / divorced / abandoned / separated / widowed daughters shall continue without any change”.

Indian insurance industry is not ready to consider many of these relatives as the member of a family when it comes to issue the health insurance .We have instance where a mother wanted to take a policy for unmarried daughter of 27 yrs but the policy was refused as she is over 21 yrs.

It is in the interest of Insurance co’s to broadbase the definition of a family so that no of insured is increased , no of policies to be issued is reduced. This is the only way to be cost effective in handling the business.

Are Indian Pvt health Insurers blocking payouts ?

The Economic Times of May 6,2008 has carried part of the report released by USAID .The contents are ;

INDIAN health insurance is growing by 25% every year, it’s penetration is less than 0.02% of the GDP, yet there is no expertise on the sector, says USAID report.
The report, released on Monday, to study the impact of private life insurance on health coverage in India has said that the focus in India is on controlling claims pay-out by following strategies designed to minimise insured person’s ability to collect claims. “There is excessive emphasis on disqualification because of pre-existing conditions and post-claim underwriting”, it said. No wonder then, that it is one of the largest litigation areas for insurers. The report has suggested a slew of measures to improve the regulatory framework for health insurance.
For the regulator, Insurance Regulatory and Development Authority (IRDA), the report has a separate prescription for health insurance. Separate reserving rules should be considered for the different categories of health insurance, taking into account the short-term versus long-term nature of contracts, whether policies provide indemnity or assured benefits and the loss experience of varying health insurance products.
It has also asked IRDA to promulgate specific regulations for the sector. These include a minimum regulatory definition of pre-existing illness or condition to provide clarity in interpretation spelling out maximum “look-back” and “look-forward” periods. Further regulation is need to prohibit post-claims underwriting, making it mandatory for insurers to offer both group and individual policies among others.
Taking into account medical inflation, the report called for higher public health care spending. Effective primary care and prevention, safe maternity care and chronic disease management should be a part of public and private insurance, it said. “The burden of disease as measured by Disability Adjusted Life-Years could be reduced significantly if both health insurance coverage and publicly provided care included these services,” it said.
The country has a dismal record of even hospitalisation coverage – the basis for health insurance, it said. Quoting a recent census, it said only 1.7% of admissions were reimbursed and the average reimbursement was only Rs 258 (or 3.6% of the average hospitalisation cost of Rs 6,225).
Private insurers’ administrative cost are 40% of total premiums, double the target benchmark of 20%. Policy holders pay higher charges for healthcare services than those without insurance, because the mediclaim product has been modified in ways that make it less a program to control the cost of care and more a reimbursement target for providers.
The report forsees a more dynamic TPA market going forward, where TPAs could partner with insurer organizations. To encourage competition, it is recommended that mutual insurance companies and non-profit companies should be allowed to enter the market. Although IRDA can retain licensing TPAs, parts of regulation of TPAs should gradually come under the contractual relationships that insurers have with TPAs.

Our comments are;
We as an industry lack innovativeness.When an insurance co wants to develop a product they simply see the products of other co’s and try to copy the same.We suggest they should look at products from around the world and then come out with product.

Reliance stops health gold policy

Reliance has stopped issue of Health Gold Policy.They will continue to issue standard & silver policy.

The salient features of Gold were;

1Higher sum assured

2 Critical illlness also covered

We feel that this was a good policy but one can assume that this was not a profitable product and that is why it became necessary for them to withdraw this product.

A quetion before we the consumers is '' Should it be made mandatory for Insurance co's to release an ad informing the fact that they are withdrawing a specific product?''

Your comments are invited.