New Delhi [India], August 11: Indian consumers are witnessing significant changes in the individual health insurance and private medical insurance landscape. Over the last few months, many policyholders have reported steep rises in their health insurance premiums. According to official filings and market reports, individual health insurers are now seeking their largest premium hikes in over five years. This trend affects millions of families and individuals who rely on these products for financial security during medical emergencies. Factors leading to premium hikes Several reasons have led individual health insurers to revise rates. During the COVID-19 pandemic, insurance companies faced a sharp surge in claims related to hospitalisation and treatments under private medical insurance policies. In FY22-23, claims ratios for health insurers crossed 90%, up from averages of 60-70% in previous years. This means that for every Rs. 100 collected as premium, insurers paid Rs. 90 as claims, squeezing their profits.

Rising medical costs are another key factor. According to the National Health Authority, medical inflation in India averaged 14% in 2022-23, one of the highest in Asia. Treatments, diagnostics, and even standard procedures in private hospitals have become expensive. Insurers adjust premiums upwards to keep pace with these higher payouts.

India’s Insurance Regulatory and Development Authority (IRDAI) reports that insurers have also enhanced coverage with new features such as coverage for mental health, modern treatments like robotic surgery, and day-care procedures. While these are valuable to policyholders, they increase claim outgo, adding pressure on premiums.

Regulatory permission for premium increases Health insurers cannot increase premiums arbitrarily. They must file premium revision applications with the IRDAI, which closely examines the justification. In early 2024, at least 14 leading private and public sector insurers, including HDFC Ergo, ICICI Lombard, Star Health, and National Insurance, filed for hikes ranging from 15% to 35%, according to industry estimates and filings reviewed by Mint.

For most individual health insurance and private medical insurance products, this is the sharpest rise since FY18, when premiums saw 10-14% increases. Major insurers argue that cumulative inflation and elevated claims from 2020 to 2023 require a correction in rates to maintain product viability.

Which policies and consumers are affected the most Impact on individual health insurance policyholders The premium hikes have the greatest impact on individual health insurance customers. These are people who buy policies directly, rather than as part of an employer scheme or family floater.

For example, a standard Rs. 5 lakh health cover from a leading private insurer, which was priced at Rs. 8,000 for a 30-year-old in 2019, will now cost between Rs. 10,000 and Rs. 11,000, after the approved hike. For senior citizens or those with pre-existing ailments, increases are even sharper, sometimes up to 25-30%.

Group insurance plans see slower increases Corporates and organisations that buy group or employee policies have bargaining power and larger risk pools. Hence, while group policies also see some price increase, these are usually lower than those for individual retail buyers. However, experts warn that persistent medical inflation will eventually influence group premiums as well.

How premium hikes affect affordability and healthcare access Increased out-of-pocket expenses With higher premiums, policyholders, especially from the middle class and self-employed segments, are forced to rethink medical cover. Some may reduce the sum insured, opt for policies with co-payment, or even drop coverage altogether. A study by the Insurance Brokers Association of India in early 2024 observed that up to 18% of individual health insurance policyholders considered downgrading or cancelling their policies following the hike announcements.

Financial strain on families and vulnerable groups Health costs are among the largest unpredictable expenses for Indian families. A sudden increase in annual premiums by Rs. 2,000 to Rs. 5,000 can strain household budgets and lead to delayed renewals or lapses in cover. Senior citizens, who have higher medical needs, are particularly affected as they already pay the highest premiums in the market. This reduces access to private medical insurance, forcing dependence on limited and often overburdened public healthcare services.

IRDAI’s role and regulatory responses Ensuring consumer protection and industry viability The IRDAI is responsible for balancing the financial health of insurance companies with the well-being of policyholders. The regulator has sought detailed actuarial data and justifications for each premium increase. In numerous cases, IRDAI has moderated or staggered the hikes, asking insurers to spread out increases over two to three years to prevent sudden financial shock.

Product standardisation and transparency IRDAI has also introduced guidelines to improve transparency in product features and pricing. Insurers must now clearly state the reason for premium increases in their policy renewal notices and offer comparison charts with other available products, helping consumers make informed decisions.

To promote access, IRDAI encourages the launch of standardised products such as Arogya Sanjeevani and Saral Suraksha Bima, which provide basic cover at affordable rates. While these may not have all the bells and whistles of private medical insurance plans, they ensure minimum protection for a larger population base.

Expert tips to manage rising individual health insurance costs Shop and compare policies every renewal cycle With premium hikes, loyalty to one insurer is no longer the best option. IRDAI’s guidelines now allow portability, making it easy for consumers to switch between insurers while retaining continuity benefits. Always compare features and pricing on official platforms such as the IRDAI website or trusted aggregators before renewing your individual health insurance.

Consider top-ups and super top-ups Instead of buying an expensive comprehensive plan, you can take a base cover and add a super top-up plan for higher coverage at a lower overall premium. For example, taking a Rs. 5 lakh base cover with a Rs. 20 lakh super top-up may cost less than buying a single Rs. 25 lakh policy. Many experts recommend this approach for middle-income families and self-employed professionals who need higher protection but want to keep annual outgo manageable.

Opt for higher deductibles and co-payments If you are healthy and financially secure, choosing a higher deductible or voluntary co-pay option reduces your annual premium. However, this means you will pay a fixed amount from your pocket in the event of a claim. Carefully evaluate your risk appetite and medical history before choosing this route.

Use wellness benefits and claim-free discounts Most individual health insurers now offer wellness programmes, discounts for claim-free years, or incentives for maintaining a healthy lifestyle. Actively use these features to reduce your premiums for private medical insurance. Simple steps like routine health check-ups, regular exercise, and non-smoking can have a tangible financial benefit.

How to avoid policy lapses after premium hikes Plan for timely renewal Irrespective of premium increases, always renew your policy before the due date. Lapsed individual health insurance policies may result in a loss of waiting period benefits and continuity for pre-existing diseases. Many insurers offer a grace period of 15 to 30 days, but cover for claims is not available during lapses.

Seek expert or a financial advisor help If you are unsure about the impact of premium hikes, consult a trusted insurance advisor or financial planner. They can analyse your current needs, suggest suitable individual health insurance products, and guide you on combining covers or switching options without losing protection.

Conclusion: Proposed premium hikes in individual health insurance and private medical insurance represent the most substantial increases in over five years for Indian policyholders. While driven by rising healthcare costs, greater claim payouts, and market competition, they create affordability challenges for middle-class families and vulnerable groups.

To navigate this evolving landscape, consumers should regularly compare policies, use top-ups creatively, and leverage IRDAI's consumer protection initiatives. Reviewing your health coverage priorities, seeking expert advice, and staying aware of regulatory updates will help manage the impact of premium increases without sacrificing protection.

(Disclaimer: The above press release comes to you under an arrangement with PNN and PTI takes no editorial responsibility for the same.). PTI PWR