The Indian insurance sector has been finally opened up to the private sector with the passage of the Insurance Regulatory Act early this year. With this unprecedented move by the government, a way for entering this lucrative business has been finally cleared for both Indian private sector and foreign insurance companies. Quite a few insurance companies from the US, the UK and Canada have already set up their offices in India looking for Indian partners. Some of them are Royal and Sun Alliance and Standard Life of UK. All State Insurance and Commercial Union of the US. Sun Life and Canada Life of Canada. Surprisingly none of these foreign insurance companies is interested in the healthcare sector. Cigna, a US-based insurance giant is the only company, which is showing some interest to enter into the healthcare segment. This is despite the fact that the country has a 300 million strong middle class population as estimated by the National Council of Applied Economic Research (NCAER). This is indeed a huge and tempting market. The government owned The General Insurance Company is the only entity currently dealing in non-life insurance business in India; and GIC has been able to tap only a very small fraction of this large market. This is amply clear from the fact that the total number of Mediclaim policies sold by GIC does not exceed 2.5 million despite a very low premium charged by GIC. In short, GIC has miserably failed to market Mediclaim policies despite its monopolistic position all these years.

Healthcare costs are definitely unaffordable to the huge middle class population of India especially in case of hospitalisation. Public hospitals and healthcare facilities in most of the states in India are a sham. In such an environment, healthcare insurance with competitive rates of premium should be a blessing for several middle class families. Despite all these, why are insurance companies shy of plunging into the healthcare business? There are a few important reasons. First of all, it is a high-risk proposition considering moral hazards in this business. Fake prescriptions, hospitalisation bills, medicine bills, etc. can be easily procured in India for a consideration. This immorality profile of an Indian definitely makes the insurance companies ponder seriously before taking the jump into this business. The IRA stipulation of a minimum paid up capital of Rs.100 crore for setting up an insurance business is also not a small amount. The decision of Cigna to not to insure OPD treatment and to enter into tight contracts with healthcare providers, thus, is understandable. The stated objective of such a position is to ensure quality treatment with optimum costs. Lack of interest in investing in health insurance should not however be taken as an opportunity by the companies to fix any rate of premium and indulge in avoidable disputes in settlement of claims. It is clearly the responsibility of Insurance Regulatory Development Authority (IRDA) to ensure that such unfair practices do not take place