Premium Hike & Trust Gap Hit Insurance Sector

Many Indians are hesitant to renew their health insurance policies, citing a lack of trust and confusing policy language. During the pandemic, fear of hefty medical bills drove a surge in policy purchases, including specific COVID-19 plans. However, these same policyholders are now reluctant to continue, saying they struggle to understand the complex legal terms and doubt they'll receive adequate assistance when needed.

Interviews with patients who bought policies during the COVID-19 crisis reveal a significant trust deficit. Many feel they don't fully understand their coverage and fear claim rejections. This fear is amplified by widespread stories of negative experiences with insurance companies, often shared within families and communities.

Adding to the challenge for private insurers is the growing popularity of the government's Ayushman Bharat scheme. With over 50 crore people covered, many are opting for this free or low-cost option instead of paying high premiums for private insurance. This shift is further contributing to the slowdown in private policy renewals.

Health insurance costs are soaring, but that's not the only reason fewer Indians are buying policies. People are also holding off on getting covered. Years ago, a basic health plan might have cost for ₹3 lakh. Now, insurers suggest at least ₹5 lakh, with more features like maternity coverage. Plus, rules forcing insurers to cover more illnesses have pushed prices up. Many people seem to be thinking they can wait, or just skip insurance altogether

The rush to buy health insurance seen during the pandemic is losing steam. While people were quick to get covered during those uncertain times, that's changing. Individual health insurance, which makes up a big chunk of the market, did grow, reaching ₹37,068 crore.

However, a big 20% jump in premiums last year did not translate to a huge increase in policyholders. In fact, the number of people with personal health plans only went up by 5%, which is about the same rate as the workforce grew.

New figures show the health insurance market is slowing down. Growth in premiums was only 10.44% in the last ten months, a big drop from the 20.79% seen a year earlier. Even though the sector has hit ₹1 lakh crore, the slowdown is worrying insurance companies, people with policies, and the whole healthcare system

Insurance companies are raising premiums to offset growing payouts, as medical expenses surge. The problem? Insurers are paying out more in claims than they're collecting in premiums. As per the insurance companies, this financial strain is largely due to rising medical inflation.

While Delhi/NCR hasn't seen dramatic increases in medical procedure costs, other major medical hubs like Mumbai are experiencing fluctuating prices. In these cities, doctor fees and overall treatment costs can vary significantly, leading to unpredictable and often higher expenses. This dynamic pricing model is contributing to the overall escalation of medical treatment costs.

Notably, the figures released on rising medical expenses don't fully reflect the situation in Delhi/NCR, suggesting regional variations in healthcare costs.

Despite the current challenges, the Indian health insurance market still holds significant growth potential. To unlock this, insurers must prioritize rebuilding public trust through clear, accessible policies and proactive awareness campaigns. Offering affordable entry-level policies with smaller sums insured, coupled with incentives for maintaining coverage, could attract a wider customer base. By focusing on transparency and accessibility, insurers can reignite growth and ensure more Indians have access to vital healthcare protection."