Rampant malpractices are bleeding public sector insurance companies and they need to restructure their activities so as to bring about change in the sector. Claims ratio is as high as 150 percent and there are too many m

CS Professional · Insurance - Law and Practice · PYQS · December 2020
Rampant malpractices are bleeding public sector insurance companies and they need to restructure their activities so as to bring about change in the sector. Claims ratio is as high as 150 percent and there are too many malpractices in the health sector. The structural inefficiencies are hampering the development of the sector. Insurers need to develop a framework for collecting statistics and databases, develop comprehensive products which are transparent and user-friendly. Health insurance should be made mandatory for all jobs and employees should be encouraged to go in for CGHS schemes as well as policies provided by insurance companies. The health care sector is estimated at ₹80,000 crore and is expected to grow by ₹10,000 crore every year. Expenditure on health insurance is expected to touch six percent of household income up from the current two percent. Government spending accounts for less than 25 percent of expenditure on health while in developed countries the figure is in the range of 40 to 60 percent. Although the insurable population is placed at two million the potential market is placed at 315 million people. Insurance companies are keen to resolve the stalemate as they do not make money from health insurance. Another key area where business is impacted is in the area of mergers and acquisitions. A survey on health insurance was carried out and nearly 37 percent of respondents opined that corruption could impact the valuation of a company thereby denying shareholders of a fair price. Moreover, this could also make it difficult for them to find a suitable business partner, thereby seriously impacting the growth prospects of the business. What are the ethical aspects of claims management particularly in the case of health insurance?

Answer & Explanation:

Ethical aspect of claims management: Claims operation involves considerable sums of money. It is not uncommon to find that some of the individual claimants are tempted, either knowingly or unknowingly, to make company's funds due to the activities of such persons is not justifiable as far as other honest claimants are concerned who are satisfied with what is due to them in terms and conditions of the policy. Therefore, it is the responsibility of the insurance companies, as trustees of the policyholders' money, to ensure as far as possible, that moral hazard is eliminated or at least minimized. Since loss is personal, the individual is likely to react in a subjective manner and tends to exaggerate his claim. This can be tackled without much difficulty. But, a more difficult problem is corporate clients trying to take advantage of insurance. Some of them are said to treat their insurance division as a profit centre. Therefore, it is necessary to successfully assess the moral hazard at the time of underwriting itself. When this is subsequently found, it is essential that insurance companies share this information with one another and deal with such clients in a suitable manner. In the case of Health Insurance, most of the case settlement is done by TPA. A TPA is basically a middle man who facilitates the settlement of a health insurance claim. A TPA is appointed by the insurer. TPAs help you (the insured) process your health insurance claim using various hospital bills and documents. However, they are not responsible for claims rejection or acceptance. So as per the case a survey on health Insurance was carried out and nearly 37% respondent said that corruption is leading to high valuation of a company.

Topics: Health Insurance

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