How to Manage Rising Health Insurance Premiums in India

Health insurance premiums in India are rising every year, making it a growing concern for policyholders. Take Ramesh, for example. Last year, he paid INR 30,000 for his family health insurance policy. Now, on renewal, Star Health has increased the premium to INR 40,000 – a steep 33% hike. This is not an isolated case; many policyholders are facing similar increases.

So, what causes these premium hikes, and how can one mitigate their impact? Let’s explore this in detail.

Major Reasons for Rising Health Insurance Premiums

Health insurance premiums increase due to a mix of economic, healthcare, and regulatory factors. Here are the key reasons:

Medical Inflation: Healthcare costs in India are rising faster than general inflation. With annual medical inflation ranging between 10-15% (compared to general inflation of 4-6%), insurers pass these increased costs onto policyholders. Expensive treatments, advanced medical equipment, and rising hospital charges contribute significantly to this trend.

Rising Claim Costs: With growing awareness, more people are utilizing health insurance, leading to higher claim payouts. Lifestyle diseases like diabetes and hypertension, an aging population, and improved insurance benefits all contribute to more frequent and costly claims, prompting insurers to raise premiums.

Regulatory Changes: IRDAI has introduced several guidelines in the interest of policyholders. Recent changes, like reducing the pre-existing disease waiting period from 48 to 36 months, cutting down the moratorium period from 8 years to 5 years, and mandating coverage for chronic illnesses, mental health, and HIV/AIDS, have increased insurers’ risks. While these are positive developments for policyholders, every such change comes at a cost for insurance companies, which they ultimately pass on to consumers through higher premiums. In recent years, this has been one of the key reasons behind the rising health insurance costs.

Operational Costs: Insurance companies incur expenses like administration, marketing, and agent commissions. These costs rise with inflation and competition, further driving up premiums.

Prevalence of Chronic Diseases: With a surge in non-communicable diseases due to sedentary lifestyles and poor dietary habits, long-term healthcare needs increase, putting additional strain on insurance companies and contributing to premium hikes.

How to Reduce the Impact of Rising Health Insurance Premiums

While premium hikes are inevitable, policyholders can take several strategic steps to manage costs effectively:

Choose Coverage Based on Actual Needs:

Insurance is for emergencies, not luxury. Before buying a policy, assess your age, location, and available healthcare facilities. For instance, if you live in an area with a well-functioning government medical college, your healthcare expenses might be lower, reducing the need for an expensive policy. Avoid buying insurance based on aggressive marketing tactics; choose coverage that suits your actual requirements.

Avoid Unnecessary High Coverage in Youth: If you are young and healthy, opting for a high coverage policy (e.g., INR 1 crore) may not be the best decision. Instead, consider buying a low sum insured policy initially and enhancing the sum insured in the existing policy as you grow older. However, agents and various online platforms selling health insurance often create fear that you won’t be able to increase your coverage in old age. But there are alternatives if an insurance company denies enhancing your coverage later on, such as:

• Purchasing an additional policy from the same or a different insurer.
• Opting for a top-up policy and choosing a deductible limit up to the sum insured of the policy you already have.
• Government schemes like Ayushman Bharat, which cover senior citizens after the age of 70.

Starting with a modest sum insured and gradually increasing coverage based on need is a more practical approach

Opt for Policies with Bonus Benefits:

A policy with a sum insured of INR 10 lakh and renewal bonuses can be a good choice. Over time, accumulated bonuses can increase your coverage to twice the original limit without additional premium costs. Buying a policy that offers bonuses year after year, regardless of claims, can be an excellent option. For example, the ICICI Lombard Elevate policy provides a 20% loyalty bonus on policy renewal, irrespective of claims. After five years, a INR 10 lakh policy will become a INR 20 lakh policy without any additional premium.

Split Coverage Across Multiple Insurers:

Instead of buying a single policy with a high sum insured from one insurer, consider splitting coverage. For example, instead of a INR 10 lakh policy from one insurer, buy two INR 5 lakh policies from different insurers. This strategy helps in multiple ways:

• One insurer may increase premiums aggressively, while the other may not.
• If one insurer rejects a claim, the other may approve it.
• It allows flexibility to drop an insurer with steep hikes while continuing with the other.

Public sector insurers like Oriental, United India, and New India Assurance tend to have more stable premiums compared to standalone health insurance providers like Star Health, Niva Bupa, and Care, which often increase premiums more frequently. Therefore, you can opt for one policy from a public sector insurance company and another from a private insurance company.

Getting claims from multiple policies is no longer a hassle after IRDAI regulations in this area. In fact, it is one of the best strategies to avoid steep premium hikes and claim rejections.

Consider Top-Up or Deductible-Based Policies:

Top-up policies start covering claims only after a specified deductible amount is crossed. For example, a policy with INR 10 lakh coverage and a INR 5 lakh deductible will only pay claims exceeding INR 5 lakh. These policies are cost-effective, less prone to frequent premium hikes, and ideal for those looking to balance affordability and coverage.

Opt for Long-Term Policies:

Buying a health insurance policy for 3-5 years instead of annual renewals can help lock in premiums and avoid yearly hikes due to medical inflation. Some insurers, like Star Health’s Superstar policy, offer long-term coverage with fixed premiums and additional discounts for upfront commitment.

Rising health insurance premiums are a reality, but policyholders can take proactive steps to manage costs. By choosing the right coverage, avoiding unnecessary high sums insured at a young age, splitting policies between insurers, opting for top-up plans, and selecting long-term policies, one can mitigate the impact of annual premium hikes. Smart planning and regular reassessment of your insurance needs will ensure you get adequate coverage without overspending.