Covid has proved to be a game-changer for India’s health insurance industry, with awareness about health covers and the demand for them rising sharply post-pandemic. But the recent headway on health insurance penetration cannot sustain if premiums for individual insurance covers turn unaffordable. While Insurance Regulatory and Development Authority (IRDA) regulations require health insurers to revise their pricing only once in three years, actual industry practice seems to be at variance with this requirement.

This newspaper recently published a report where health policyholders complained of steep hikes in their annual premiums irrespective of their age and claims record. The hikes were also significantly out of sync with the inflation rate for healthcare expenses which has hovered between 4.3 per cent and 6.3 per cent in the last 12 months. One of the key triggers for the recent escalation in health insurance premiums appears to have been Covid itself. IRDA data show that the pandemic triggered a sharp spike in hospitalisation claims filed by policyholders, with insurers’ incurred claims nearly doubling between FY20 and FY22. But over the last two years, claims have flattened out as insurers have seen brisk growth in new business. Therefore, it seems about time for insurers to stop hiking premia to recoup Covid-related underwriting losses. This is evident from the industry’s Incurred Claims Ratio (ICR) falling back to 89 per cent in FY23, after rising from 88 per cent to 109 per cent between FY20 and FY22. ICR measures the claims paid in any given year, compared to sums collected by way of premiums from customers.

A further break-down of ICR data suggests that individual insurance buyers may be footing the bill for losses in other segments. While ICRs for individual health covers stayed below 100 per cent even during Covid and were at just 76 per cent in FY23, those for government and group schemes topped 119 per cent during Covid and remained high at 96-102 per cent in FY23. A dialogue must be initiated by the regulator to ensure that the Government and corporate buyers pay premiums that compensate fully for the risks they bring to the table, so that retail buyers are not burdened with extra costs.

A good portion of the blame for the steep pricing of health insurance covers must also go to the healthcare industry, particularly the corporate hospital ecosystem. Covid has shone a harsh light on the industry’s practice of subjecting patients to unnecessary diagnostic procedures and treatments. It is such practices that led to the Supreme Court calling for standardised tariffs for medical procedures across States. Setting up a healthcare regulator to oversee this under-regulated industry should be a top priority for the new government.