Health Premiums Rise As Insurers Play Catch-Up With Inflation

Insurers have raised premiums on health covers to pass on the higher cost of medical services.

“Premiums on health products have gone up by 7–14% this year," Venkatesh Naidu, chief executive officer of Bajaj Capital Insurance Broking, told BQ Prime. "Around half the industry has done it, and the other half will get it done over the next month.”

An industry executive, who spoke on the condition of anonymity, pegged the increase higher at 10-20%. A lot of people prefer to hold small-health covers of Rs 1-2 lakh and these are unprofitable for insurers, he said, adding that will prompt a bigger increase.

Many insurance companies had refrained from large premium increases during the pandemic, Naidu said. The claims paid out during 2021-22 were four times higher than in the previous year, with the most related to Covid-19 claims, he said.

India also saw the highest rate of medical inflation in Asia in 2021 at 14%, followed by China at 12%, and Indonesia at 10%, according to a May report by Motilal Oswal.

That can also be attributed to the higher number of consumables since the onset of the pandemic and the introduction of modern and costlier treatments, Naidu said.

Health Insurance For Senior Citizens

Insurance premiums rise with age as it is calculated based on an actuarial formula to determine the risk. So costs can be prohibitive for senior citizens.

There isn’t a one-size-fits-all solution for ensuring that senior citizens have adequate protection to cover medical emergencies.

“In many cases, especially if the individual is above 70 years of age, the cost of the premium is substantial," said Prableen Bajpai, founder, FinFix Research and Analytics. "There are, also, usually waiting periods on some ailments, which make the policy unviable."

In these situations, it is better to set aside a corpus that will cover medical emergencies, he said

“For those below the age of 65, the Aarogya Sanjeevani Policy is a good option to consider,” said Amol Joshi, founder of PlanRupee Investment Services. This is a standard indemnity health insurance policy for individuals and families. The sum insured ranges from Rs 50,000 to Rs 10 lakh. The Insurance Regulatory and Development Authority of India had mandated that all insurance companies must provide this policy from April 2020.

Beyond that age, Joshi, too, agrees about building a medical emergency corpus. The amount to be set aside would depend on the city of domicile and the cost of medical treatment.

“I generally advise individuals to set aside twice the cost of the most expensive surgery in their area," Joshi said. "So, if a major surgery costs Rs 5 lakh, the corpus to be set aside should be Rs 10 lakh. So, even if there is a medical emergency and the corpus is used, there is some left over after that.”

However, Amit Chhabra, business head–health, PolicyBazaar.com said, “I would normally advise taking a comprehensive policy for senior citizens, with no room rent capping or deductibles. You should also have the restoration benefits in place."

With restoration benefits, the sum insured is restored after it has been exhausted with a claim.

While the cost of such a policy is steep, Chhabra said individuals can choose to remove some of the benefits to make it more affordable. For example, an individual can opt for capping room rent and a 20-30% co-payment option, he said.  

The premium paid by senior-citizen is deductible from taxable income under the old regime of the Income Tax Act. For senior citizens, premium of up to Rs 50,000 a year is deductible under Section 80D of the Act.