Providing health insurance to their workers is now compulsory for manufacturing firms, even as they struggle with cost constraints
Even as the nationwide lockdown continues, a Delhi-NCR-based appliance manufacturer is set to begin operations from April 27 with all necessary approvals in place. But, procuring medical insurance for the 300 workers at its production unit is proving to be a tall order.
The company realised it will have to spend at least Rs 4.5 lakh to buy a group cover for the production unit members.
“We only provided health insurance for senior executives at corporate offices. At a time when sales have already taken a hit, the sudden insurance cost is tough to bear,” said the head of finance at the firm.
The ministry of home affairs (MHA) in its guidelines on April 15 said industrial and commercial establishments, offices will have to provide mandatory medical insurance to workers. This was part of the guideline offering relaxations to resume production in non-containment zones in the country amidst the coronavirus (COVID-19) outbreak.
Following this, the insurance regulator asked non-life/standalone health companies to offer comprehensive health insurance to individuals/groups to comply with the guidelines.
Insurance companies said industrial firms wanted discounts, but insurers are not in a position to do so. On average, large production factories in sectors like automobiles, steel, pharmaceuticals have between 800-2,000 employees.
“Manufacturing entities don’t want to spend an additional Rs 3-5 lakh on buying medical insurance for their plant employees. However, MHA has stated that it is compulsory to do so,” said the chief distribution officer at a private general insurance firm.
Insurance Regulatory and Development Authority of India (IRDAI) has advised insurers to devise comprehensive health insurance products with simple wordings, conditions and affordable cost for this purpose.
IRDAI’s advisory is to ensure that the companies buy these medical insurance covers for a long-term and not merely for COVID-19.
On the one hand, manufacturers are rushing to buy a cheap cover on an immediate basis, while on the other insurers are seeking time to suggest appropriate covers.
“This is not a cover that can be issued instantly. We will need to do an analysis of the employee size, plant location and age group,” said the underwriting head at a health insurance company.
MHA has mandated health insurance to ensure that in case, any worker contracts COVID-19 during the course of work, he/she is able to seek treatment from a good medical facility without worrying about costs. Tests done for COVID-19 at private labs cost up to Rs 4,500.
Companies though are in a hurry to buy the medical cover to avoid any violation of the MHA guidelines.
The sales head at a health insurer recalls how a consumer goods firm wanted to buy a cover for its 100 employees but was only ready to pay 50 percent of the quoted premium. When the insurer refused to offer any discount, the company decided not to buy a cover.
Standard group insurance products offer a cover Rs 5 lakh to 10 lakh to employees with an annual premium ranging between Rs 1,000-3,000 per employee. The risk profile and the type of job apart from the age group decides the premium charged.Follow our full coverage of the coronavirus pandemic here.