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After the completion of detariffing, Insurance Regulatory and Development Authority (IRDA), expects health insurance sector in India to grow larger than fire insurance business. The removal of tariff and cross-subsidy will make health insurance viable. With the eradication of tariffs, insurers do not find the need to offer discounts on group medication to get insurance from co operates.
With effect from November 2007, floor limits on fire insurance rates will be made void and hence the premium from fire insurance was expected to shrink by 20%. Removal of floor rate will depend upon the new rates the insurers will file when the floor limts will be removed explained IRDA chairman, CS Rao. He also stated that in 2001-02, health insurance premium from all companies amounted to only Rs 675 crore, while the industry generated a premium of Rs 3,200 crore in 2006-07. A separate health insurance body was suggested by him when the Insurance Act was amended. At present health insurance company and insurers are not defined clearly and are covered in the category of non life insurance.
Today normal solvency method is used for health insurance whereas other countries have moved towards a risk-based approach. While the health insurance business is doing relatively well, there has been a lot of complaints from senior citizens regarding the high cost and non availability of health insurance which needs to be dealt with. The IRDA has constituted a committee to look into these matters.
Speaking at same event, Jean-Michel Chatagny, managing director, Asia Swiss Re, said the world spent $4.1 trillion on health in 2004. Of this, 19% came from private health insurance, with the government and social insurance accounting for bulk of the expenditure. Mr Chatagny pointed out that out-of-pocket expenditure as a percentage of total health spend was highest in Asia with health insurance penetration at less than 1%.
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