India grapples with the highest medical inflation rates in Asia, at a staggering 14 per cent. This is the primary factor riding your health insurance premiums high, according to experts. In October 2023, the Indian Express reported insurers forecasting a 15 to 20 per cent surge in general insurance premiums including health insurance especially in the wake of the anticipated increase in reinsurance costs.
However, individuals are wondering why it didn't rise so much during the Covid-19 years. Simply put, a health insurance premium is the cost individuals pay, typically annually, to their health insurance provider in exchange for medical coverage against health care expenses. The premium amounts vary based on policy features, with higher coverage needing higher premiums.
A spokesperson of Star Health and Allied Insurance Co. Ltd said, "Health insurance premium is derived based on a lot of vectors such as age of the insured person, zone of residence of the customers, existing cost of healthcare and pattern of diseases as may be experienced by the pool of insured population. "
According to Star Health's representative, generally, the increase in healthcare costs, age, and changes in the pattern of how the pool of insured population experience illnesses and accidents, like the spikes in hospitalisations during COVID-19, usually result in insurance premium hikes.
IRDAI guidelines state that once a product clears regulatory approval, the premiums remain unchanged for three years. After that, any revision or modification requires notification to policyholders at least three months before, with reasons for such changes.
Medical Inflation: Star Health emphasised that the inflation rate for healthcare in India is usually much higher than the general inflation in the country, hence, insurers would have to align the premiums in tandem with the same. Reportedly, during the pandemic, insurers claimed they delayed hikes, but are now adjusting for the sustainability of business.
Zone of Residence: Health insurance premiums might change based on where you live. Big cities like Mumbai and Delhi are often more expensive to cover, so insurers divide cities into zones, with zones varying based on insurers. Moving between zones might increase or decrease your cost. Insurers will issue refunds if there is a decrease can policy cost. Some insurers even change a city's zone, confusing. But if you move to a higher charged zone, either you have to co-pay choose a higher premium or switch policies.
Claim History: One of the predominant factors is the correlation between claim history and premium increments. If you've made lots of insurance claims, the insurer might raise your premiums, or it can be after allowing a specific number or amount of claims.
Age Factor: Age also emerges as a decisive factor. Premiums also tend to increase with age as the insurance provider associates a higher risk with you. As a result, experts advocate obtaining health insurance at an early age to mitigate potential future premium escalations.
"Some companies have devised premium rate tables which increase premium every year as you age, and there are some who have rate tables where the premium increases with the age band shifting to next slab," the spokesperson said.
In the past, porting policies led to losing accumulated benefits, such as waiting periods for pre-existing diseases.
However, the Insurance Regulatory and Development Authority (IRDA) now safeguards policyholders' rights to port policies to other insurers while retaining accumulated benefits, such as waiting periods concerning pre-existing conditions. However, individuals are urged to conduct thorough research on premium versus coverage before making any switch, considering the recent widespread premium hikes among private insurers.
According to the spokesperson, there are many factors to be considered before customers opt to port their existing policy, and should not be based on the premium increase only. "It is only a matter of time before the insurer who a customer might choose to port to, may also increase the premium as the healthcare cost inflation is same for all insurers. An insurer may completely medically underwrite a proposal before accepting a proposal for an incoming portability policy, possibly raising premiums or rejecting your proposal in case of any existing morbidity, he said.
"Customers should ideally look at porting a policy in case of non-suitability of the product as per their needs. Fill forms accurately declare all conditions and respond to all questions correctly to avoid issues during claims. Be cautious of intermediaries pushing switches between policies for their commissions and not your needs," he cautioned.
