According to experts, the shrink is due to dip in sales of group policies. As companies are cutting budget on employee health plans, corporate group policies are slowly losing its sheen, which in result has put greater pressure on margins of insurance companies. Therefore they have also hiked the premiums of corporate policies following high claims ratio.

The public sector companies are likely to hike rates for health insurance premium. This is because finance ministry sent them a letter instructing them not to underwrite policies causing heavy losses. The insurers are also asked to reduce discounts on individual as well as group policies.

The combined loss ratio of PSU insurers is now above 100 percent and it is a matter of worry for the industry. An official from a health insurance company said, “Medical inflation, on an average, is 17 percent year-on-year, and the premium has to go up in order to cope up with the rise in cost.”