Wednesday, October 10, 2007


New Health Insurance Product


The Life Insurance Corporation of India (LIC) will file its first health insurance product with the Insurance Regulatory and Development Authority (IRDA) this month.

The corporation expects to start selling the long-term product by next month. LIC's first health insurance product, an outcome of a separate arm it set up in Hyderabad, will be one with a tenure of over 10 years.

It is expected to be like a hospital cash product, where a lumpsum is paid upfront for specified illnesses instead of the reimbursement model, where a claim is paid after treatment. It will also have an element of a health savings account, wherein some amount of the premium will go towards a savings component. Interestingly, it is likely that part of it will be a conventional insurance product and the rest of it a unit linked product to take care of the savings component.

LIC has set up centralised operations in Hyderabad with a team of 20-30 people. It has also tied up with eight third party administrators (TPAs) to take care of claims servicing in different regions.

However, unlike general insurance companies, the TPAs will not take care of claim payouts. Instead, LIC has tied up with Axis Bank, Bank of America and Syndicate Bank for payment of claims to customers. Munich Re will be LIC's reinsurer for the product. LIC is also likely to talk to Swiss Re for future health insurance products.

The product is likely to be a family floater, covering a family with a single sum insured. Pricing will alter with age on an annualised basis. It will also cover pre-existing products with some clauses and is also likely to have limits put in to control costs.

"We would like to ensure that we remain cost effective. Having a long-term product enables us to rationalise the administrative costs,'' said LIC ED DD Singh, who heads the health insurance business.

Asked whether LIC was likely to look at a separate firm for health insurance, Singh said it was up to government, but added that the government was inclined to consider health insurance as a separate subsidiary of LIC.

LIC looks to sell the product through all its distribution channels in a big way. It hopes to sell the product through its over 10 lakh agents. Singh said LIC will also look at a separate product for senior citizens.

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