The scrapping of ‘Kalaignar Kapitu Thittam' (KKT),a health insurance scheme, by the new Tamil Nadu Government will have an impact on Star Health Insurance. More than 50 per cent of the premium income from this health insurance scheme goes to Star Health, which is the lead insurer.

This insurance project was launched by the earlier DMK Government for an annual premium of Rs 517 crore in 2009. It was aimed at families living below the poverty line for life-saving treatment of up to Rs 1 lakh. In 2010, the State Government had earmarked about Rs 750 crore for payment of insurance premium. The total claims settled under this scheme so far is Rs 850 crore.

“The scheme was largely beneficial only to private sector hospitals and that is why this regime has decided to scrap it,” said Ms Jayalalithaa, Chief Minister, in the course of her reply to the debate on the Governor's address.

The Tamil Nadu Government plans to launch a new health insurance scheme.

When contacted, Mr K. Jagannathan, Chairman and Managing Director, Star Health Insurance, said, “No comments”.

IRDA's concern

The insurance regulator had expressed its concerns on government-sponsored programmes a few months ago. It said that both in terms of scope of coverage and unit prices, insurance companies have brought down the premiums to ‘unbelievable levels'.

So far the experience of Star Health shows that its losses are coming down and it may even make a marginal profit. This means the insurer has an effectively-managed system, said Mr J. Hari Narayan, Chairman, IRDA. However, it remains to be seen if a scaled up version of the product to cover a larger population, would be managed effectively and the losses controlled.

Dependence on government schemes

Industry observers said the scrapping of KKT would have a negative impact on the company owing to its overdependence on government schemes. Now the insurer will have to start focusing on insuring more individuals.

Currently, 60-70 per cent of its premium comes from various government health insurance schemes and the remaining from individual. In 2009-10, the insurer's premium income more than trebled. And during this period the company had underwritten the KKT scheme.

The company had reported a 30 per cent growth in premium income to Rs 1,249 crore in 2010-11.

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