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IAI Actuarial Core Principles · Business Management · Issues and challenges in each main practice area

An Indian general insurer faces rising health-insurance claims, with medical costs growing faster than general inflation and fraud suspected in some hospital billing. Which response best deals with this challenge?

The best response is to analyse claims data by provider, use network agreements and fraud checks to control costs, and review premium rates regularly. This tackles both medical inflation and suspected billing fraud, whereas freezing premiums or abandoning data worsens losses.

  1. AAnalyse claims data by provider, introduce cost controls such as network agreements and fraud checks, and review premium rates regularlyCorrect
  2. BStop collecting claims data to save costs
  3. CFix premiums permanently for ten years to attract customers
  4. DReserve only for claims already paid
  5. Stop offering any renewals on all policies

Explanation

Medical inflation and fraud require data analysis, provider-level cost control and regular rate reviews. Fixing premiums or dropping data collection would worsen losses, and reserving only for paid claims understates liabilities.

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