Are health insurance premia pinching the insured? This question is agitating analysts concerned with the insurance industry, public health management, and issues of social security of late, thanks to the state of affairs in health insurance.
While the rapid growth of the health insurance segment in the last three years has brought cheer to the industry as it led to a substantial push in financial and social security, there have been increasing concerns over surge in the premia.
The positives first. Post Covid-19, especially in the last three years, growth in the health segment has been a major driver for the increase in the business of non-life insurers. There has been a significant rise in the contribution of health insurance cover in overall non-life insurance business, which also includes fire, marine, motor, home, factory, shop, travel and liability insurance etc.
Of the different segments under the non-life insurance business, health insurance is now the largest segment.
As per data from the Insurance Regulatory and Development Authority of India (IRDAI), health cover accounted for 38.6 per cent of the total non-life premium in the financial year 2024-25. The gross direct premium underwritten by all non-life insurers — including standalone health insurers and specialised players — grew 6.2 per cent in FY25, reaching ₹3,07,612 crore, up from ₹2,89,652 crore in FY24. In contrast, FY24 had seen a higher growth rate of 13 per cent over FY23.
The total gross written premium for non-life insurers rose 5.2 per cent to ₹2,58,092 crore (₹2,45,343 crore). Standalone health insurers reported a robust 16 per cent growth in combined gross premia, which touched ₹38,414 crore (₹33,119 crore). The health cover segment drove growth in the previous years, too, accounting for a lion’s share of 37.1 per cent in FY24 and 35.3 per cent in FY23.
Slow down
However, growth in health premium slowed down in the last financial year for the first time in three years which is pertinent. As per the General Insurance Council data, growth in the health segment cooled off to 8.98 per cent in 2024-25 from 20.25 per cent in the previous fiscal. The gross premium was at ₹1.18 lakh crore in FY25 compared to ₹1.08 lakh crore last year.
A recent report by CARE Ratings noted that the sector’s performance was impacted by the transition to the 1/n accounting rule. There are other factors as well. “We understand a general hike in health insurance premia across the industry also adversely impacted the growth along with decline in contribution from government insurance schemes,’‘ the MD & CEO of a leading standalone health insurer told businessline.
According to industry estimates, health cover premia saw a growth rate of 10 to 18 per cent across various general and standalone health cover providers in the last one year.
Defending the hike in premia, industry captains argued that pricing should not be seen in isolation. “It is not a one-way traffic. There are different components in pricing, including medical inflation as well as 18 per cent GST. Why can’t the government waive off the GST on health cover for public good?,’‘ was the response of a listed private sector general insurer when asked about the rationale behind premium hikes.
Insurers are also of the view that premium hike will not actually affect a policyholder as there is a greater hike in medical inflation, which one would have to bear from one’s pocket if there is no cover. However, this is not a sound argument in view of the partial payment of policy claims, or their rejection by the insurers on various grounds.
There is also a disparity in premium hikes. Hikes in premia of retail health cover policies were higher than those of the corporate group cover segment.
There is also a variation in hikes depending on the age profile, and the insurers appear to be following the thumb rule: The younger the person, the cheaper the cover.
Except in some cases, the regulator almost gives a free-hand to the health insurers in product pricing. Last year, IRDAI, while expressing concern over a general increase of premium, directed the insurers not to increase health insurance premia beyond 10 per cent per annum for senior citizens.
Way forward
Though some insurers argue that premia hikes did not have an adverse impact on the demand for new policies and renewals, the slowdown in premium growth in the health segment in FY25, notwithstanding the greater awareness on the need for cover post Covid-19, surely indicates a concern among the commoners.
The reach of health insurance is still low in India with over 90 crore people having access to health cover, as per government data. The IRDAI’s Vision for Insurance For All by 2047 will need a greater policy push from the government going beyond the regulatory directions to expand the coverage. Removal of GST on health cover is an immediate solution that can lower the premium.
Also, there is a need to examine the surge in medical inflation, which is estimated to be in the range of 20 per cent during the last two years, according to data available with insurers.