Low Health Insurance renewal ratios of Reliance Insurance
Health Insurance Policyholders of Reliance Insurance are an unhappy lot. That is because of the steep increase in health insurance premium that Reliance has announced. Till as recently as last year, the rates quoted by Reliance for health insurance were amongst the lowest in the industry if not the lowest. This was part of a strategy to acquire as many customers as possible. While the acquisition strategy worked, the problems came in later as Reliance started incurring heavy losses on their health portfolio. This forced Reliance Insurance to increase their premiums by as much as 400-500% across certain categories. Such an increase in premium rates was unheard of in the Indian Insurance industry.
But this created another problem. Customers were not prepared to accept this steep increase in their health insurance premium and stopped renewing their policies. If certain rumours are to be believed , the renewal rate on their health insurance policies fell to as low as 10%-25%. The market rate is typically around 75% to 90%. One has to understand here that in the case of health insurance, the policyholder mostly wants to renew as he is deeply inconvenienced by shifting to another insurance company as his pre-existing diseases would not be covered. This is because currently there is no health insurance portability in India. Thus, it is significant to note that even when there is such a discentive to not renew, existing policyholders of Reliance General are still not renewing. The bait and switch model which Reliance thought they will use on their customers did not work well.
Given the dismal renewal rates due to the insurance premiums having been jacked up, Reliance Insurance is understood to have requested IRDA ( the regulator) to allow them to revise their pricing downwards. Unconfirmed reports suggest that IRDA has disallowed the request. Be that as it may, this teaser rate strategy of Reliance Insurance is not at all confidence inspiring, especially for an organization whose Life Insurance arm cannot seem to wait to tap the equity markets through an IPO. In some ways, the market has already given a thumbs down to Reliance Insurance with its market share down by as much as 40% in the six months ending September 2010 over the corresponding period in 2009.