Insurers have seen a steep rise in claims recently, primarily driven by an increase in hospitalization, critical illnesses, and monsoon-related ailments, such as dengue and malaria. Consider this, ICICI Lombard General Insurance claim ratio in Q2FY23 jumped to 82 per cent compared to 74 per cent in the previous quarter. Similarly, Star Health Insurance’s claim ratio increased from 67 per cent to 68 per cent in Q2FY23.
During the Covid period, all insurers saw a sharp jump in their claims because of increased hospitalization. However, it was expected to come down to pre-covid levels once cases start declining. But insurance companies say not only elective surgeries the frequency of even regular medical and critical cases has increased post-covid, which may be due to long COVID.
Will this rise in claims lead to an increase in health insurance premium rates in 2023? “Retail health is a long-term portfolio. Therefore, you need to constantly monitor the portfolio outcome in terms of its experience. And at different points of time, wherever the need arises, you need to make effective price revisions.” says Gopal Balachandran, Chief Financial Officer and Chief Risk Officer at ICICI Lombard. The last price revision that ICICI Lombard did was in the third quarter of 2021 where average premium was increased by 8 per cent.
Experts say while the claim ratios were largely stable in the first two quarters of the calendar year 2022, they have seen a steep increase starting September onwards. The increase is due to high incidence rates across certain sets of ailments, especially planned surgeries and critical ailments leading to overall high claim ratios for the industry as a whole.
“Premium revisions are predominantly linked with medical inflation which in turn is a function of several factors like rising costs, new advances in medical treatments, technologies etc. These factors are ever present in a growing economy like India and hence will continue to impact health insurance premiums as every insurer revises the price periodically for each product. However, a pandemic like Covid has brought about a multitude of changes in the treatment protocols which in turn have also impacted the costs. If these changes are permanent, then these factors could also impact the premiums in the long run. Insurers carry out premium pricing or repricing basis the overall sustainability of the premium rates subject to Insurance Regulations issued by IRDAI,” says Prasun Sikdar, Managing Director and Chief Executive Officer at ManipalCigna Health Insurance Company.
Going forward if the claim frequency continues to rise, especially with the looming fear of next wave of Covid-19, one can expect another rate hike soon on health insurance policies.