The health insurance companies may load up the premium by over 5 per cent nationally if the claims data in Delhi-NCR shows an abnormally high level of hospitalisation and respiratory disorders.
The other option before insurance companies is to tighten underwriting practices in the Delhi-NCR by insisting on extensive health check-ups before onboarding customers. There is a high risk of heart disease, lung cancer, stroke and respiratory diseases in a smog-hit Delhi and neighbouring places. So far there is no hard data to prove the high level of claims because of smog-related hospitalisation.
A health policy penalising customers of a particular city because of health risk is not very common in India. Not all the products have pricing based on zones or geography but geographical pricing does exist in the general insurance industry. The major geographical factors influencing the pricing are the cost of living, cost of healthcare treatment, claims record and incidence of frauds etc.
The insurance regulator IRDAI allows geography-based pricing.
Ashish Mehrotra, MD and CEO of Max Bupa Health Insurance says by doing zone-based pricing, insurance companies are able to price appropriately for geography.
“This ensures that regions with a lower incidence of pollution and infection and geographies where treatment cost is lower are not penalised due to higher expenses in other cities.
So, how will insurance companies load up the premium to take into account the future risk of higher claims in Delhi-NCR because of smog-related hospitalisation?
According to experts, insurance companies distribute the premium across cities to diversify and manage the risks better so that it doesn’t pinch the people in a certain city or geography.”If I single out certain geography for health risk, the premium in that area will go up substantially and kill the product,” says an official of the insurance company.
Currently, the pricing based on health risk in certain cities or zones is not very popular. “Certain cities are more exposed to certain kinds of risks as against others. Currently, the data is scattered and not standardised,” says an insurance official. “Loading a policy based on residency has a complex structure,” says another official of a health insurance company.
Insurance officials say Delhi-NCR is also witnessing a high level of fraud claims in health insurance policies. Many companies are planning to factor in fraud as a major element in determining product pricing.