India's all four public sector insurance companies suffered losses worth ₹26,364 crore in the health insurance business for five years from the financial year 2016-17 to 2020-21, according to the Comptroller and Auditor General of India (CAG).
These state-run PSU insurers include New India Assurance, United India Insurance, Oriental Insurance, and National Insurance.
The losses in the health insurance business of PSU insurers either wiped out or decreased the profits of other lines of business or increased the overall losses, the auditor says.
"The losses were on account of group health insurance policies where premium charged was less and claim outgo was more in comparison to retail policies," it adds.
Health insurance business is the second largest line of business of the PSU insurers – the first being motor insurance – having gross direct premium of ₹1,16,551 crore during the five-year period from 2016-17 to 2020-21.
PSU insurers' market share in health insurance business is also reducing continuously vis-à-vis the standalone health insurers and private insurers, says the CAG.
As per the finance ministry's guidelines for underwriting of group policies, the combined ratio of standalone group policies shall not exceed 95% and for group policies involving cross-subsidy, the combined ratio shall not exceed 100%.
The auditor says that these guidelines were not complied with by PSU insurers and the combined ratio of group health insurance segment as reported by PSU insurers ranged from 125–165%.
The CAG audit, which analysed third-party administrator (TPA) based allocation of business (annual premium) and TPA-wise incurred claims ratio (ICR), found that all the four PSU insurers allocated major share of business – 15% to 44% – to one TPA (Medi Assist India TPA Pvt. Ltd.) despite high ICR of above 100% in the claims serviced by the TPA in some years.
For other TPAs also allocation of business was either increased or maintained at the same level despite high ICR in the claims serviced by the TPAs in previous years, says the auditor.
Health Insurance TPA, a joint venture of PSU insurers, was formed with an objective to enhance customer experience and bring greater efficiency in health insurance claim processing. Despite Health Insurance TPA having comparable performance parameters and presence in major cities, allocation of business to the entity by the PSU insurers was minimal, says the auditor.
PSU insurers took the initiative to have their own network of hospitals by forming a preferred provider network (PPN) but even after 10 years, enrolment of hospitals under PPN coverage was inadequate, says the CAG.
The four PSU insurers together have PPN agreements with only 2,552 hospitals (as against 9,900 hospitals in the network of Star Health Insurance Co. Ltd. and 10,000 hospitals in the network of HDFC Ergo General Insurance Company Ltd.).
The audit revealed that New India Assurance and United India Insurance settled claims more than once on different dates although the policy number, insured name, beneficiary name, hospitalisation dates, illness code, hospital name and disease were the same.