Rising Healthcare Costs Prompt Higher Insurance Premiums for Indians
Mumbai, India – Indian consumers are experiencing a rise in health insurance premiums this year, primarily due to a confluence of factors: the increasing complexity and expense of medical treatments, escalating labor costs, and a growing prevalence of chronic diseases. This trend is expected to continue.
“I don’t see this trend reversing in the next two to three years,” stated Abhishi Bhatia, an associate partner at McKinsey & Co., a management consulting firm. Speaking to Insurance Asia, Bhatia projected that costs will continue on an upward trajectory.
According to a report by Willis Towers Watson Plc, insurers are likely to increase their premiums to offset the impact of soaring medical expenses in India. Healthcare costs in the country are projected to increase by 13.2% this year, compared to 12.3% in the Asia-Pacific region.
One significant driver of these rising costs is the advancement of healthcare technologies. Amit Chhabra, the chief business officer of general insurance at Policybazaar Insurance Brokers Pvt Ltd., noted that the increased adoption of advanced treatments, such as robotic surgeries, has led to higher costs. He anticipates hospital expenses will continue their climb due to inflation and growing demand for sophisticated treatments. The average cost of hospitalization has doubled since 2020, reaching $920 (₹80,000), Chhabra added.
“More complicated treatments are now happening in India,” Chhabra explained. “Treatments that earlier required people to go outside the country are now being done here.”
Despite a significant rise in health insurance premiums in the past year, the number of new and renewed policies has not decreased significantly, according to Amitabh Malhotra, executive director at Capco India, an information technology consulting firm.
This trend is especially noticeable in high- and middle-income markets, where there is a greater understanding of the value of insurance. However, Malhotra pointed out that higher premiums could force lower-income consumers to cancel their policies, potentially impacting insurance penetration within their category.
In a December report, the Insurance Regulatory and Development Authority of India reported a decrease in insurance penetration, which fell to 3.7% in the fiscal year 2023-2024, down from 4% the previous year. Life insurance penetration dropped to 2.8% from 3%, while non-life insurance remained stable at 1%.
“The other factor, which is an unfortunate trend, is that we are seeing a lot more incidence of chronic illnesses in the younger population,” Chhabra stated, noting that treatment for heart diseases is becoming more common among younger individuals.
Currently, there is a proposal to allow insurers to offer both life and non-life products. Also, the government has permitted full foreign ownership in insurance companies, policies that investors are closely watching.
“Over the last few months, we’ve had a massive number of conversations with global insurers, particularly those looking to enter the health insurance space, because they see it as an opportunity to scale quickly in India,” noted Bhatia.
To alleviate medical inflation, Malhotra suggested state policies that regulate prescription drug prices, enhance public healthcare infrastructure, and encourage the use of generic medicines could be beneficial.
“People realise that health insurance is mandatory,” Chhabra said. “At the same time, the cost of healthcare is rising, which makes health insurance even more necessary as a product.”
“The next five years are going to be extremely positive for the health insurance industry in India,” he added.
Bhatia called for realistic expectations, as India has yet to fully embrace preventive care. “Whilst there is positive momentum, it’s not yet at a level where I believe we’ll see a significant shift in the next two to three years.”
