Medical insurance premiums surge by 10-25% due to rising costs, increased demand

Premiums for medical insurance policies have risen 10-25 percent over the past year, driven by medical inflation, technological innovation and increased awareness of better healthcare facilities.

Industry players said the increase by independent health insurers was much higher at 15-20 percent, while general insurers were slightly lower at 10-15 percent because of their relatively diversified portfolios.

“The cost of healthcare services has increased year-on-year driven by technological improvements and other costs such as medicines, medical treatments and procedures due to inflation. Medical inflation in India is around 15 per cent against price index inflation,” said Parthanil Ghosh, Head of Retail Business at HDFC ERGO General. consumer by 6 percent, significantly increasing claims costs for insurance companies.

In addition, private health insurance is mostly availed by citizens of first-tier cities where the increase in treatment costs is much higher. This usually leads to higher insurance premiums.”

The pressure on Medicare prices began during Covid due to a huge run out of claims. While insurance companies expected this to subside after the pandemic, costs remained high due to improved hospitalization demand, postponement of planned procedures, and higher hospitalization expenses due to advances in medical technology and procedures.

During Covid, Medical inflation has skyrocketed. But even after covid has subsided, we haven’t seen healthcare costs go down. There was an inflection point in 2019-2020 when there was a massive increase in average claim volumes, and that hasn’t gone down,” said Dr. Bhebatush Mishra, Product, Underwriting & Claims Director, Niva Popa Health Insurance.

He added that health insurance, unlike life or fire insurance, is a high repeat (claims) business, although average claim sizes tend to be lower compared to other lines of business.

While most insurers chose not to raise premiums significantly during the period due to the public health crisis and regulatory prudence, the impact is now being felt due to the continued pressure on insurers’ profitability.

“Awareness is increasing so people go to more and better hospitals, which leads to higher costs like room rent, doctor’s fees, etc. Because of this ticket size, the number and frequency of claims has also increased,” said Raghavendra Rao, Chief Distribution Officer, Future Generali India Insurance, adding that treatment costs have also multiplied exponentially due to new technology and expert treatments.

Thus, despite the high insurance premiums, insurance companies are witnessing strong demand for health products, especially in the segment of premium customers, as today customers are looking for more comprehensive coverage rather than specific diseases. Insurers have linked the increase in average ticket size of 10-15 percent to driving increased awareness about underinsurance, rising health care costs and a preference for more coverage and features, with most policyholders opting for at least $10.

“We are seeing a growth in younger demographics compared to policies for seniors and family. There is a steady shift from regular Mediclaim to plans that provide benefits such as sum insured recovery, wellness and home care,” said Jagjeet Siddhu, Chief Distribution Officer, Kotak Mahindra General Insurance. .

Insurers now expect premiums to remain at current levels for 1-2 years before another round of increases, and more policyholders may opt for payment options such as EMI or opt for covers with smaller deductibles to offset some of the impact of higher premiums.

With changing consumer behavior towards personal health, insurance, fitness, nutrition, wellbeing, health monitoring, and checkups, insurance companies now expect rapid adoption of digital technologies, including telemedicine. Going forward, growth is likely to be led by comprehensive product offerings, which provide a higher insured amount considering underlying medical inflation, coverage of costs such as outpatient, and other wellness benefits within a single product.