Medical Insurance Needs to Change Tack
EghtesadOnline: Unprofessional approach of insurers in underwriting medical insurance policy categories could inflict considerable loss on the insurance industry's performance in the coming years.
Medical category has been one of the largest sources of premium income for the sector, solely accounting for 26% of its total premium during the last fiscal year (March 2016-17).
However, the payout ratio of the medical category is close to 100%, which means insurance firms pay back to the insured all they receive as premium, according to Financial Tribune.
Hossein Karim Khan Zand, CEO of Novin Insurance, says the rise in medical expenses plus shortfalls in the medical system is lowering profitability of insurers. Though, “insurance companies should also be blamed for the present state of affairs.”
"Over the years insurance companies have been offering medical policies at lower rates with the aim of increasing market share," he said.
"Truth be told, insurers need to take a new approach…their reluctance towards real and necessary risk assessment methods could lead to the dissatisfaction of policyholders and weaken the industry."
Risk assessment, also called underwriting, is the methodology used by insurers for evaluating and assessing risks associated with an insurance policy. The same helps in calculating the correct premium for an insured.
As per regulations, insurance companies are not required to apply risk assessment methods in group medical insurance plans.
More than 13 million people were covered by insurance firms' medical coverage during the last Iranian year. The number was 11.2 million the year before.
Parsian Insurance Company, one of the largest private insurers, sold medical insurance to more than 2.3 million Iranians last year -- up 94% year-on-year. The company, however, reported a payout ratio of 134% in the category.
Mihan Insurance, Pasargad Insurance and Novin Insurance had the lowest claim ratios, at 61%, 63% and 75%, respectively.