MUMBAI: The capital requirement for setting up a standalone #health insurance company could be reduced by as much as 33% given that claims liabilities in the sector are lower than those for automobiles or factories.
The #Insurance Regulatory and Development Authority of India (#Irda) is using the risk-based capital method for assessing solvency requirements for stand-alone health insurance, which would be 100% of liabilities, excluding assets — much lower than the 150% that’s the norm. Like capital adequacy for banks, insurance companies are mandated to keep aside capital as solvency margins.
“The regulator is of the view that #health insurance companies can operate at a much lower capital of 100%,” said an Irda official, who didn’t want to be named. “There would be a different set of numbers for management expense and commission rates for health insurance now that it is a separate category.” This follows the passage of the Insurance Bill, which has enabled the regulator to frame different rules for health insurance companies.
The capital requirement for setting up standalone health insurance companies has been kept at Rs 100 crore in the Insurance Bill. The industry had asked the government to lower this to Rs 50 crore.
So far, health insurance has been clubbed with general insurance. Companies were allowed to launch annual products. Now, with a separate category, there could be innovations around product features. The committee on health insurance is working on health savings accounts and longer tenure products.
There are five standalone health insurance companies. The latest to enter the sector is Birla MMI Holdings that has filed its application with the regulator. With the amendment and the foreign direct investment (FDI) limit being raised to 49%, insurers expect innovation and an expansion in product offerings.
Health insurance is the fastest growing segment of #general insurance industry, expanding at 20% in 2014-15 against 9% for the broader segment. Global insurance companies such as South Africa’s Discovery and US-based Aetna have been scouting for partners to set up health insurance subsidiaries in India.