Come April 2012 and Indians may find health insurance rates and others, like motor and property insurance rates going up.
General Insurance Corporation (GIC), India's national reinsurer, has been asked by the finance ministry to stop underwriting loss-making businesses.
The direction was issued in a communication dated 7 February 2012. The government has also directed smaller health insurers to bear the risk of loss-making businesses, or increase premium rates.
While smaller insurance companies have the option of accepting or rejecting insurance proposals, GIC has to absorb the risks that are passed on.
Reinsurance companies are important throughout the world because they provide an umbrella of protection to smaller insurance companies. This is how the latter are able to keep the insurance business running even if claims exceed a certain level.