Medical inflation triggers sharp hike in health insurance premiums

Health insurance premiums are going northwards. HDFC Ergo General Insurance raised premiums for its flagship health insurance products ‘Optima Secure’ and ‘Optima Restore’ in August. Star Health and Allied Insurance said it was planning to increase premiums by 10%-15% for 30% of its products. Now, Niva Bupa is hiking the premium for ‘Health Companion’, one of its oldest products. New India Assurance, the country’s largest general insurer, has enhanced the premium for some of its products by 10%, which would be effective from November this year.

Medical inflation

Health insurers and industry observers said that premiums are being increased due to the rise in medical inflation and the reduction in the waiting period for pre-existing diseases from the earlier stipulation of four years to three years from April this year. The insurance regulator has also lowered the moratorium period from eight years to five years from April. This means that policyholders who have paid premiums continuously for five years will be entitled to have all their claims paid by the insurer up to the limits prescribed in the policy.

“Like general inflation, medical inflation is a reality. The cost of treatments has been going up, in fact, faster than general inflation. We have revised the ‘Health Companion’ premium and have made efforts to ensure that such revisions stay as low as possible and continue to be pocket-friendly while beating inflation,” Niva Bupa said in a letter to its policyholders.

Star Health and Allied Insurance’s chief executive officer Anand Roy said that the company was planning a price hike in approximately 30% of its product portfolio during the company’s Q1 earnings call for 2024-25.

“We're planning to take the price hike at about 30% plus of our current portfolio and the average price hike we're looking at is between 10% to 15%. So roughly about anywhere between around 4% on the overall portfolio,” said Aditya Biyani of Star Health during the earnings call.

Covid caused losses to insurers 

During the Covid pandemic claims surged and the health insurance sector incurred losses resulting in a hefty industry-wide increase in premiums. Though health insurers are profitable now, medical costs continue to remain high. This has resulted in health insurers hiking premiums for several popular policies for the second consecutive year.

“But there are certain conditions, which may have a long-term impact on the pricing. For example, a reduction in the moratorium period, a reduction in the pre-existing disease periods, and so on. So, we will take price increases if required. We're looking at the impact of these changes in the larger products,” Mr Roy said.

In all, 52% of health insurance policyholders said that their premium has increased by over 25% in the last 12 months, according to a survey conducted by LocalCircles, a pollster on issues of governance, public and consumer interest, in May this year. In fact, 21% of health insurance policy owners indicated that the premium increase was 50% or more in the 12 months preceding May while 31% indicated an increase of 10%-25%.

IRDAI measures 

The Insurance Regulatory Development Authority of India (IRDAI) has initiated several measures to make health insurance a lot more consumer-friendly. This includes lower waiting periods and cancellation charges for policies and advocating the introduction of products for all types of treatments including OPD (out-patient treatment). 

                                                  (By arrangement with livemint.com)