Health Insurance Premiums on the Rise

In a startling development, health insurance premiums have seen a significant surge, leaving many policyholders grappling with the decision to either downgrade their coverage or drop out entirely. Reports indicate that one in ten policyholders has missed their renewal this financial year, with about 10% witnessing a 30% or more increase in renewal costs. Alarmingly, only half of these individuals have managed to pay the full premium.

Understanding the Surge

Insurers attribute the steep hikes to a worsening claims ratio, which measures the percentage of claims against the total premium collected. Health premiums, unlike other insurance costs, do not increase steadily but tend to jump at intervals, especially as policyholders age. This is due to the higher claims associated with older age groups and the rising cost of medical treatments, known as medical inflation.

Impact Over the Years

Over the past decade, 52% of policyholders have seen their premiums grow at a compound annual growth rate (CAGR) of 5-10%, meaning a Rs 100 premium could increase to Rs 162-259 after 10 years. Another 38% experienced a CAGR of 10-15%, with premiums rising to Rs 259-404. A small fraction, 3%, faced even steeper hikes, with a CAGR of 15-30%.

Industry Insights and Consumer Strategies

Despite the challenges, the renewal ratio has shown a 10% improvement from the previous year, according to Amit Chhabra, chief business officer of general insurance at Policybazaar. He emphasizes the importance of understanding these increases in the context of medical inflation, which stands close to 14%. Policyholders are finding ways to mitigate costs, such as opting for lower variant plans or choosing deductibles to reduce premiums.

As the health insurance market evolves, both consumers and insurers are adapting to the changing landscape, seeking balance between comprehensive coverage and affordability.