When Champaklal Shah and his wife bought two mediclaim policies of Rs 3 lakh each more than 20 years ago, the total annual premium for the policies was Rs 3,000. Now they pay close to Rs 25,000 on these policies. Shah, 70, and his 65-year-old wife are facing a familiar dilemma that comes with old age.
While they cannot surrender their policies fearing a medical emergency, the premiums are way too steep for them; they have risen over the decades thanks to loading—the amount insurance companies add to the basic premium to cover costs of maintaining the business.
After a long wait, Irda replied: "Health insurance premium rates are decided by insurers based on the claims experience of the relevant age groups and inflation towards medical costs. As you may be aware, the authority had already intervened on the premium issue in respect of renewal of senior citizens' mediclaim policies...
Irda's guidelines on mediclaim policies for senior citizens says, "The loading of premiums if justified for renewals of mediclaim policies issued to senior citizens shall not exceed 50-75% of the premiums charged prior to the revision."
Why are such policies expensive?
The premiums of mediclaim policies have increased by almost 30% in the past 2-3 years, mainly due to two reasons. The first one is the emergence of real-time pricing based on industry claims and the second, high health care inflation. Medical costs in the country have escalated by up to 30% in the past two years.
It is obvious that senior citizens are bearing the brunt since most treatments incurred at this age require intensive care, say insurers.
From an insurer's perspective, it's a challenge to offer the right cover at the right price for senior citizens. In the underwriting process, insurance companies price the senior citizens' premium as a percentage of a standard life risk.
For example, if you paid 1.5% of the cover as a premium at the age of 25 years, the premium amount can shoot up to 8% of the cover when you become 60.
The concept of differential loading
Loading is the increase in premiums, triggered either by a claim due to serious surgery or hospitalisation. By this definition, it's the elderly who will experience massive loading in mediclaim premiums. This loading is not standardised. It depends on a policyholder's age, medical history, number of claims and the insurers underwriting practices.
Being a part of the Tata group, the fund has the backing of a very trusted brand name with strong retail connect. While the current CEO has done an excellent job in leveraging the Tata brand name to AMC's advantage, it is ironic that this was just not capitalised on at the start. Incorporated in 1995, Tata Mutual Fund remained an 'also-ran' fund house for around eight years. Till March 2003, it had a little over Rs 1,000 crore in assets and 19 AMCs were ahead of it. But soon after that the equation changed. It was the fastest growing fund house in 2004 and 2005. During these two years, it aggressively launched six equity funds, two debt funds and one MIP. The fund house as of now stands at No. 8 in terms of asset size. This fund house has a lot to offer by way of choice. And, it also has a number of well performing schemes. Tata Pure Equity, Tata Equity PE and Tata Infrastructure are all good funds. It also has quite a few good debt funds. The funds of Tata AMC are known to...
