CAG report reveals multiple settlement of claims, excess payment by public sector insurers

Public sector health insurance companies lacked appropriate validation checks and controls resulting in lapses such as multiple settlement of claims, excess payment over and above the sum insured, incorrect assessment of admissible claim amount, irregular payments on implants and others.

It has come out in a CAG audit report on ‘Third Party Administrators in Health Insurance business of Public Sector Insurance Companies’ tabled in the Parliament on Friday.

There are 32 general insurance companies doing health insurance business in India. Out of these, four are public sector general insurance companies (PSU insurers) including The New India Assurance Company Limited (NIACL), United India Insurance Company Limited (UIICL), The Oriental Insurance Company Limited (OICL) and National Insurance Company Limited (NICL) offering various health insurance products.

Data analysis by audit revealed that NIACL and UIICL have settled claims more than once on different dates although the policy number, insured name, beneficiary name, hospitalisation dates, illness code, hospital name and disease were the same.

Audit pointed out 792 cases (Rs 4.93 crore) of multiple settlements in NIACL and 12,532 cases (Rs 8.60 crore) of multiple settlements in UIICL, as seen from the database. Further, Audit observed in NIACL that the claims settled to policyholders exceeded the sum insured plus cumulative bonus in 139 retail claims indicating excess payment of Rs 33 lakh.

In UIICL, the claim paid exceeded the sum insured in 2,223 claims involving Rs 36.13 crore, which included group claims. For group policies, there is a provision in the policy for such excess payment over sum insured by way of ‘Corporate buffer’. However, the claim processing sheet/note verified did not indicate use of buffer or available balance of buffer and utilisation, etc, said the audit report.

TPAs need to carry out mandatory investigation of claims as per Service Level Agreement but in NIACL, UIICL and OICL, 562 claims (for Rs 40.46 crore) out of 2,735 sample claims did not contain investigation reports, said the report.

The audit report pointed out that systems and procedures for Internal Audit / Health Audit were inadequate and the number of audits carried out was insignificant as compared to the target’s fixed/ total number of claims settled.

“During the three financial years ended March 2019, 659 audits of claims processed by TPAs were conducted by Health Audit teams constituted by PSU insurers and a recovery of Rs 14.30 crore was pointed out, however, PSU Insurers so far recovered only Rs 6.06 crore,” said the audit report.

All the four PSU insurers incurred losses in the health insurance portfolio in all the five years from 2016-17 to 2020-21.

Aggregate loss of the four PSU insurers was Rs 26,364 crore during 2016-17 to 2020-21.

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