State-run general insurance companies did not comply with Finance Ministry’s guidelines on underwriting of group policies and witnessed huge losses on account of their health cover business, the Comptroller and Auditor General (CAG) has revealed in its latest report. 

The combined ratio (claims paid plus expenses divided by premium earned) of group health insurance segments of all the four public sector general insurers ranged from 125 to 165 per cent between FY17 and FY21, way above the ceiling of 100 per cent stipulated by the Finance Ministry, the CAG has pointed out. 

The four insurers – New India Assurance Company, United India Insurance Company, Oriental Insurance Company and National Insurance Company – incurred a combined loss of Rs 26,364 crore in their health insurance portfolio in the five years through FY21, the CAG has said in a compliance audit of third-party administrators (TPAs) in health insurance business of public sector insurance companies. 

“The losses were on account of group health insurance policies, where, on the one hand, lesser premium per life was charged by the insurance companies as compared to that of retail policyholders and on the other hand, more payout towards claims had to be incurred,” the CAG has said. “Instances of multiple settlements of claims and claim payment in excess of sum insured signify major lapses,” it has added. 

Since test check by its audit was limited to a sample of 2,176 claim records, the CAG has advised PSU insurers to conduct their own review of the remaining cases. It has also called for recovery in case of excess payments and fixing of responsibility on officials concerned. 

The CAG has highlighted the lacunae in the IT systems in PSU insurers, which “lacked appropriate validation checks and controls”. This has resulted in lapses, such as multiple settlement of claims, excess payment over and above the sum insured, excess payments due to ignoring waiting-period clause for specific diseases, non-application of co-payment clause, breaching of capping limit for specific diseases, incorrect assessment of admissible claim amount, irregular payments on implants, non-payment of interest on delayed settlement and so on.