General insurance companies are reducing the commission paid to insurance agents who sell health cover to people over 45 years of age. Some public sector general insurers have informed their agents that they would receive 15 per cent commission for health covers sold to individuals aged 45 years and below.

For those in the 45-55 age bracket, the commission is down to 10 per cent, while no commission will be paid where the individual has crossed 55 years.

This is bad news for those who are middle-aged and yet to take health insurance. Many agents have requested the Association of LIC Agents to take up the issue on their behalf.

They have also sent letters to the four public sector general insurers, the finance minister and the insurance regulator IRDA (Insurance Regulatory Development Authority).

Explains S S Bairagra, general secretary, ALICA, "People above 55 years are categorised as elderly. They would need an agent's services most, especially when there is a claim because a lot of running around will have to done. So, if no commission is paid, who will want to service them?" Simply put, no agent would want to spend effort to sell products to a customer or even service existing clients when there is no compensation provided.

What you can do

Some general insurance companies do provide standalone products, even though they are reportedly discouraging the elderly to enrol with them. Approach them for a cover, and if refused, question them.

You could also seek your agent's advice and if need be, approach the regulator. However, some companies may refuse cover as a last resort because the risks are too high for them to underwrite.

Interestingly, Bajaj Allianz has introduced Silver Health, aimed at individuals in the higher age group. Consider it to see whether it suits your needs.

Some companies also offer products that provide limited hospital cover, though at a higher cost. Some agents suggest that elderly individuals could take their mediclaim as part of a package for the entire family and that insurance companies are more comfortable with this arrangement.

Some private insurance companies also provide a cover by excluding pre-existing diseases permanently or for a specific period (generally five years) provided there is no claim and no hospitalisation reported in these initial years.

Certified Financial Planner Gaurav Mashruwalla explains some other options. "Find out where your employer has taken a group cover for employees. You can take a cover from that company as they typically allow the employees to continue with the cover by allowing them to pay the premium even after he or she retires."

The other option is to become a part of a group of individuals that is already covered under a group policy. This group could be an association of people or even your neighbourhood club, which has taken a cover for all its members. Lastly, if nothing works, plan and start saving for a possible rainy day.

The real problem

The health insurance payouts are skewed towards older people and insurance companies are finding it increasingly unviable commercially. Ish Kumar, regional manager, Oriental Insurance, says, "The health insurance business is making heavy losses. The claim ratio is over 100 per cent for us. Hence we have to reduce costs. So, instead of increasing premium rates for the customer, we are taking this step. We are not saying no to customers and they can approach us directly."

While no company has gone on record to say that it is discouraging elderly individuals from taking a fresh cover, or turning down requests for such cover, some agents and employees (of a public sector company) we spoke to confirmed that is true in select offices. They say insurance companies are also trying to deny renewals for existing customers when they cross 55.

Many people decide to take a health cover only when they are in their 40s. Asserts Kumar, "In our case, most people take cover when they are 45-plus." Adds Shreeraj Deshpande, AVP health insurance, Bajaj Allianz General Insurance: "In India, healthcare costs are on the rise but premiums are stagnant. Also, people in higher age group want health insurance more than the younger ones. This creates a discrepancy and leads to adverse selection for the insurer."

The industry's claim ratio at 130-140 per cent reflects this imbalance. For private insurance companies though, the young: old ratio is better placed at around 60:40.

However, a majority of them are yet to break-even in their health cover portfolio. Since insurance works on large number theory (pooling of risk) and given that young people are largely absent, it has resulted in consistent bleeding of the health portfolio for all companies.

Some players argue that before companies refuse a fresh cover they could look at options like loading the premium for the higher risk they would be taking. Explains Shivkumar Shankar, retail head at Cholamandalam MS General Insurance, "In some cases, loadings are applied based on the medical reports."

In extreme cases though, he says, they have declined cover, as the risk profile was adverse. Renewals, however, are never denied, he says. C.S. Rao, chairman, IRDA adds, "As long as the cover is not denied on invalid grounds, it is fine. Health insurance is not a compulsory cover. With regard to cutting agent commission, insurance companies can say they are cutting costs. Intermediation costs are quite high in the insurance business. And if insurance companies are entertaining customers directly, then there's no reason to worry."

The only silver lining for the customer is that companies cannot refuse to renew the cover, even if there has been a claim in the previous year.

Tips to Remember

Buy a cover at an early age; don't wait to fall sick

Question the insurer and find out the reasons why you are denied cover

If you are not convinced, take up the matter with your agent and IRDA

Evaluate some private insurance products specifically designed for older people

Take a limited hospital cover

Take a group or family cover

Ask you employer's insurance provider for individual cover