Health Insurance Companies Pursue Biggest Rate Increases in More Than Half a Decade
Recent significant increases in health insurance premiums in India are primarily driven by a combination of factors, including a surge in claim ratios after the COVID-19 pandemic, rising medical inflation, and increased utilisation and claims, especially from non-resident Indians (NRIs).
Claims Ratios and Financial Sustainability
In FY22-23, health insurers faced claims ratios exceeding 90%, up from 60-70% in prior years, leading to diminished profits and necessitating higher premiums to offset rising claims.
Medical Inflation and Costs
Medical costs in India have seen rapid inflation, averaging around 14% in 2022-23, increasing the costs insurers must pay for hospitalisation, diagnostics, and treatments.
NRI Insurance Adoption and Claims
There has been a 150% year-on-year rise in NRIs purchasing health insurance in India, driven by affordability and confidence in India’s healthcare infrastructure. NRIs often file claims for procedures costing between $2,000 to $40,000, contributing to insurer payouts.
These factors cause insurers to raise premiums substantially to remain financially sustainable.
Impact on Policyholders
Many individuals and families dependent on health insurance products face sharply increased premiums, sometimes the highest hikes in over five years, affecting affordability and renewals. Policyholders may have to allocate more budget to health insurance or face reduced coverage if they cannot afford the higher premiums. For NRIs, while premiums remain globally competitive, rising claims costs may eventually put upward pressure on policy pricing in India as well.
IRDAI's Role and Strategies for Policyholders
The Insurance Regulatory and Development Authority (IRDAI) has sought detailed actuarial data and justifications for each premium increase. To help policyholders navigate these increases, strategies such as consulting a trusted insurance advisor or financial planner, regularly comparing policies, using top-ups creatively, and leveraging IRDAI's consumer protection initiatives can help manage the impact of premium increases without sacrificing protection. Comparing features and pricing on official platforms such as the IRDAI website or trusted aggregators is advised before renewing individual health insurance.
In summary, the interplay of inflated medical costs, pandemic-induced claims surge, and growing insurance adoption especially among NRIs is driving premium increases, impacting millions of Indian and NRI policyholders by making insurance coverage more expensive and sometimes harder to maintain.
- The surge in claim ratios, rising medical inflation, and increased utilization and claims from non-resident Indians have forced health insurers to raise premiums significantly to ensure their financial sustainability.
- Medical costs in India have risen rapidly, averaging around 14% in 2022-23, leading to increased costs for insurers covering hospitalization, diagnostics, and treatments.
- There has been a significant increase in non-resident Indians buying health insurance in India, accounting for expensive claims that contribute to the overall financial strain on insurers.
- The increased premiums have resulted in many individuals and families facing sharp increases in their health insurance costs, which may affect their affordability and renewal options.
- In an effort to help policyholders manage these increased costs, the Insurance Regulatory and Development Authority advises individuals to consult an insurance advisor or financial planner, regularly compare policies, leverage top-ups creatively, and utilize the consumer protection initiatives available.
