‘If inflation eases, insurance premium may ease too’

SANJAY DUTTA, chief, underwriting and claims, ICICI Lombard General Insurance, who contributed to the report, explains how linking of premium to inflation will allow companies to increase or decrease rates easily.

Will companies reduce premia if inflation falls?

Today, if I want to increase my premium, I have to file it and wait for regulatory approval. If this cycle of regulatory rate filing becomes prolonged, then premia goes up by a huge chunk and the consumer gets a shock. That is why companies should be allowed to increase the price up to, say, 10 per cent (assuming CPI of 7 per cent + 3 per cent) without regulatory approval.

Similarly, if inflation falls or if competitors bring down the price then I will bring down the price. Today we have to go also to the regulator for reduction in price. This, too, should be moved out of the regulatory rate filing cycle.

Will first-time insurance buyers who are older see premia rising by a huge amount if entry-age pricing is introduced? How can it be implemented?

Premiums could go up for older people who are first-time buyers. As of now, everybody at any entry age is given the same premium, whether you have a 10-year policy or are buying insurance for the first time. Going forward, there could be different premia for same age. With technology, implementation is not an issue. This will encourage people to buy insurance early.

What is the rationale behind introducing a savings component in health insurance?

There will be a savings element to your premium which keeps adding to your kitty. You can use the savings component as long as it is for a health requirement.

That will care of two things: One, paying for components that are not payable as part of the policy. For instance, if your policy pays only for in-patient hospitalisation, you can use the savings component for out-patient treatment, medical tests and so on.

Two, while insurance companies give lifetime renewability, policyholders need to have the premium paying ability for lifetime renewability. But gets impacted after the earning days are over. So, the savings element will help build a corpus. You can decide not to touch the savings component when you are young and use it when you grow old and are unable to pay premia.

How will companies incentivise consumers for good health behaviour?

Insurance companies want customers to stay healthy because any kind of care costs money. So, we will reward healthy behaviour. For instance, you are a diabetic but your sugar level is low.

Insurance companies can have wellness plans and if consumers stick to those they may offer a discount in premia or increase in sum assured.