Health insurance companies hiking annual premiums unfairly even amid low claims settlement ratios will likely face strong penal action by the regulator, government sources told FE. The regulatory crackdown on a couple of private insurers, who have already been identified to have indulged in such practices, is expected in a month, the sources added, without naming the firms.

With complaints from the public rising for claims rejection on flimsy grounds, the government is also understood to have expressed its displeasure to the Insurance Regulatory and Development Authority (IRDA) in this regard and asked it to set examples by punishing errant companies. Prompt action by the Reserve Bank of India (RBI) against similar lapses in in the banking sector has been cited to the insurance regulator, as examples to be followed.

With complaints from the public rising for claims rejection on flimsy grounds, the government is also understood to have expressed its displeasure to the Insurance Regulatory and Development Authority (IRDA) in this regard and asked it to set examples by punishing errant companies. Prompt action by the Reserve Bank of India (RBI) against similar lapses in in the banking sector has been cited to the insurance regulator, as examples to be followed.

The government is understood to be concerned about the annual increase in health insurance premiums by as much as 20%, which is causing hardships for the poor and middle class and ultimately impacting insurance penetration. “How can insurance premiums increase be uniform, both for those who have fully claimed the insured amount and those who have not claimed or claimed just 10% of the premium,” one of the sources said.

The source said IRDA has already issued show cause notices to several private insurers based on concrete cases and one or two companies will likely be punished soon to set an example to entire industry. “There is a lot of resentment against the insurance companies among the public. The regulator should come down heavily on insurance companies, public or private,” the person said.

The government has also recently told the ombudsman of insurance companies to address public grievances in a time-bound manner.

While general insurance penetration in India remains relatively low at 1% of GDP — compared to a global average of 4.2% in 2023 — insurance density has steadily improved, increasing from $9 in 2019 to $25 in 2023.

Recently, the government told public sector general insurance companies to adopt AI-driven claim settlement systems, particularly for health insurance products, to ensure faster and more accurate claim resolution.

Source: financialexpress.com​