Health and Care Insurance
SA4 Health and Care Insurance tests pricing, reserving and regulation for indemnity health, critical illness, hospital cash and group medical products. The exam expects you to handle morbidity and claims data, apply IRDAI health rules, and explain how provider and policyholder behaviour change results.
Core rules and concepts
- Health products are filed under the IRDAI (Health Insurance) Regulations; standard products and prescribed waiting periods for pre-existing diseases apply.
- Pricing factors include age, gender, location, sum insured, deductible, co-pay, family floater structure and provider network.
- Reserves include unexpired risk reserve, outstanding claims and IBNR; health claims are short-tail but reporting through TPAs creates lag.
- Medical inflation usually exceeds general inflation, so trend assumptions matter in multi-year projections.
- Critical illness cover depends on incidence rates, definitions and survival periods, not just hospital costs.
Worked example
Earned premium is ₹20 crore and the expected loss ratio is 85%, so ultimate claims are ₹17 crore. Paid claims to date are ₹12 crore and case reserves are ₹3 crore. IBNR = 17 − 12 − 3 = ₹2 crore. If you used written premium of ₹25 crore, the expected ultimate would be ₹21.25 crore, overstating IBNR by ₹4.25 crore. The reasoning: IBNR fills the gap between expected ultimate and what is already recognised.
Traps that cost marks
- Applying a loss ratio to written rather than earned premium.
- Ignoring TPA reporting delays and seasonality in claims.
- Forgetting that co-pay and deductibles reduce claims but must be reflected in pricing.
- Treating URR as a claims reserve, or ignoring medical inflation in long-term projections.