Venkatachari Jagannathan reports on business plans of new health insurer, Star Health Allied Insurance.

Chennai: Star Health and Allied Insurance Company Limited, the only stand alone health insurer in India, the company closed 2006-07 with a premium income of Rs30 crore selling over 75,000 policies, during eight months of operations in its first year.

Apart from selling individual and group health insurance, Star Health also vends allied personal insurance policies like personal accident and overseas travel insurances. Last fiscal the company earned Rs13 crore from personal accident insurance polices and Rs1 crore from selling overseas travel insurance. The rest came from health insurance segment.

Its affable chairman and managing director V Jagannathan says, "It is challenging to be a pure-play health insurer. However it is worth it as the future potential is huge."

Getting corporates as his clients, who are bulk buyers of health and personal accident insurance policies has been a major challenge for Star Health that faces several entry issues.

All these years, non-life insurers have been dangling the loss making health insurance business for getting the more profitable corporate businesses like fire, transit and engineering insurances. And corporates feel that they would lose their leverage by opting in favour of an exclusive insurer for health insurance.

Brokers who are comfortable dealing with non-life insurers offering a wider product basket that includes health, personal and overseas travel policies service the corporate business. Finally the corporate agents are averse to dealing with a standalone health insurer as it would bar them from representing other non-life insurers.

"The days of dangling the carrot are getting numbered now. The reduction in fire insurance rates, post the dismantling of administered pricing regime, has burnt the fat used for cross subsidisation of business lines. Today other insurers are also choosy like us," says Jagannathan.

However, the jinx with the brokers is expected to continue for some more time despite the company receiving requests for quotes. "Two years from now we will be the most sought after health insurer in the country." he asserts. Today Star Health has around 45 corporates on its client''s roster.

For the present Star Health''s focus is on the individual segment where awareness about health insurance has increased substantially. The company is strengthening its distribution network with an additional 25 offices across the country and also add to its agency force.

The company has benefited from Insurance Regulatory and Development Authority''s (IRDA) permission to enroll agents of other non-life insurers; it has on its register around 5,500 agents. "We would increase the numbers to 10,000 by June this year," adds Jagannathan.

According to Jagannathan the company has requested IRDA to permit a similar facility for appointing corporate agents who are no different to individual agents except for their status as incorporated businesses. In addition the company will expand its own marketing force by hiring more marketing executives. In addition the company will also start vending its personal accident insurance policies online.

Speaking about the company''s product portfolio assistant Anand Roy, vice president, says, "We have policies for all segments starting from micro health insurance to floater covers." The company is awaiting the regulator''s clearance for launching a product to cover diabetes.

The insurer plans to advertise aggressively to help it reach its target of Rs66 crore premium income this fiscal and has hired ad agency Brand Portrait to develop its communications. So far it has been advertising on FM radio stations and a few TV channels. According to Roy, Star Health ads will be seen across all advertising medium from print and TV to outdoor and online, the budget for which is around Rs5 crore.

According to Jagannathan, the insurer''s claims outgo is very negligible, because of its strict and discriminating underwriting. The prospects are required to undergo medical tests at the company''s cost. Based on the medical test reports Star Health decides whether to accept the proposal as it is or impose additional conditions.

"If the prospect does not agree to the additional conditions or restrictions then the premium collected will be refunded after deducting the charges for the medical tests," says chief general manager Vishwajeet Mohnot.

In order to cut down costs, the company has negotiated special rates with hospitals and has a team of qualified doctors who not only process claims but also help to spot fraudulent claims from clients, hospitals and medical establishments, particularly billings in excess of normal requirements of consumable medical products in operation theatres.

In addition the company does not use the services of third party administrators (TPA) who are increasingly holding policyholders to ransom. "The claims settlement is hassle- free and there is no delay," asserts Jagannathan.

On claim recoveries from reinsurers he says, "We reinsure only high-value personal accident policies with General Insurance Corporation of India. Our reinsurance outgo is very minimal."

The positive claims experience is probably partly due to "divine" intervention — all staff start their workday with a prayer for the well being of their policyholders! Jagannathan who had introduced a company anthem United India Insurance Company Limited, at his previous employer, is planning something similar at Star Health.

Meanwhile, the company has mooted the idea of differential / regional premium rates, for which it hopes to have IRDA''s sanction. Today, except for motor and earthquake covers, premium for all other insurance is uniform across the country. In a way there is cross subsidisation between regions, with the rural and small town policyholders subsidising policyholders in metros like Mumbai and New Delhi where medical bills are very high.

Breaking the monopoly of public sector insurers in offering risk covers to the poor under government sponsored schemes, Star Health recently bagged the mandate from the Andhra Pradesh government to cover families living below the poverty line in the districts of Mahabubnagar, Anantapur and Srikulam districts.

The company designed its Aarogya Sri policy for this purpose covering six critical ailments like cancer, heart, kidney failure and others. The state chief minister Y S Rajasekhara Reddy has announced that the scheme would be extended to the whole of Andhra Pradesh in two years time, which in turn augurs well for Star Health.

"We have deployed around 350 staff in Andhra Pradesh to service this business. We have tied up with several hospitals for this scheme," says Jagannathan.

Capitalised sufficiently with Rs105 crore Jagannathan says the company will get the needed capital from the owners as and when required. Last fiscal Star Health earned Rs8 crore from its investment activity on an investment portfolio of Rs100 crore.