India’s Health Insurance Premium Doubled in 2020, but Covid is Not the Only Reason
If you still haven’t renewed your health insurance, get ready to shell out more cash from your pocket. With multiple factors coming into play, the Covid-19 pandemic being one of them, health insurance premiums have jumped up to 100 percent this year. According to Prabhat Vijh, director and principal officer at Ahmedabad-based iAND Insurance Broker, premiums have jumped by 10-15 percent for the middle age group, on an average. “However, the insurance premiums have seen a steeper increase in the case of senior citizens. Premiums have increased by as much as 100 percent in some companies in higher age groups,” he said. “For client age above 55-66 years, the premium has doubled. For example, if in 2019-20, the premium was Rs 28,000 for 2 persons, clients have received the renewal notice for Rs 55,000-60,000, this year.”
Mahavir Chopra, the founder of Beshak.org, an independent insurance awareness platform, said premiums on average have risen by 25-35 percent this year as against an increase of less than 10 percent last year. “However, for some age groups, especially in the older ones, premiums on an average have increased by 50-75 percent,” he said. There are multiple reasons for this rise — the Covid outbreak that has also caused medical inflation, government-induced coverage expansion, and change in price slabs, industry experts claimed.
The Covid Impact
Vijh said the first factor behind the rise in premiums is that “none of the insurance companies had pre-empted the cost of Covid-19 treatment”.
“Prior to the pandemic, the claims frequency was around 8-9 percent but has doubled this year to 15-18 percent. The average claim size of Covid-19 is Rs 1.6 to Rs 2 lakh, and insurance companies are being required to make huge payouts,” he said. “Recent data, as per media reports, showed that insurance companies had received Covid-19 claims to the tune of Rs 8,000 crore and they had settled Rs 3,500 crore worth of claims. Increasing premiums is the only option for insurers. However, the increase in premium was anyway due for few insurance companies,” he added.
Several insurance companies agreed with Vijh. Bhabatosh Mishra, the director, claims product and underwriting, Max Bupa, a top health insurance firm, said, “It is true that the premiums have gone up. However, Covid is not the only reason.”
Medical inflation, partially due to Covid
According to Mishra, medical inflation this year has been beyond 30 percent. “Due to Covid, the cost of non-Covid hospitalization has also increased due to additional expenses such as healthcare staff working in three shifts than two shifts, cost of sanitization, masks, gloves, etc,” he said. “Also, the average claim size has doubled. The reason is now severe patients are generally taken to hospital due to Covid paranoia. Patients with mild, moderate symptoms keep avoiding their visits to the hospital,” he said, adding that most patients with severe illness reach hospitals and generally pick high-end institutions, increasing the chances of heavier claims. “Trust issues on government hospitals exist, especially related to hygiene. Hence, people prefer more of the private hospitals,” he said.
Chopra noted that the “lack of regulations for hospital billing is making matters worse with hospitals charging substantially higher amounts for Covid-19 cases”. “In addition, while there were lesser claims for elective surgeries during the initial months of the pandemic, even these have now started cropping up. All these factors are causing healthcare inflation and consequently an increase in premiums,” he pointed out. However, a Max Bupa spokesperson claimed that despite all the factors pushing payments up, the company has taken a conscious decision to not increase premiums this year because health insurance has become an absolute necessity due to the pandemic.
The IRDAI factor and price issues
Sanjay Datta, chief underwriting and claims officer at ICICI Lombard General Insurance, noted the role of coverage expansion as ordered by the regulator, Insurance Regulatory and Development Authority (IRDAI), as another reason behind the rise. In September 2019, the IRDAI had introduced the standardization of exclusions in insurance covers under which the insurers cannot exclude specific illnesses. The regulator also made it compulsory for companies to cover a few modern treatment methods. “IRDAI has increased coverage under the health insurance policies and this has seen an increase in the health insurance premiums by around 5 percent,” Datta said, adding that Covid might not have a major role to play in price hike as “the extent of the premium increases depends on age, coverage, and sum insured”.
Another problem, the experts highlighted, is age slab pricing where premiums don’t change every year as one gets older but usually every five years. “The premiums for some products have changed between 10-15 percent, where a price hike was pending for 2 to 5 years. For some consumers, the age slabs have shifted from one age slab which has led to an increase in premiums by 10-15 percent,” Datta said.