Health insurance premium growth has slowed after touching record highs during the Covid-19 pandemic due to tapering demand from retail consumers amid affordability issues.
According to General Insurance Council data, health insurance premiums grew by 10.44 per cent year-on-year (Y-o-Y) in the Apr-Jan period of FY25 in comparison with 20.79 per cent in the year-ago period. It was around 23.57 per cent in FY23, and 25.89 per cent in FY22.
A sharp decline in premiums from the government-backed schemes and the change in accounting norms mandated by the regulator, effective October last year, have also weighed heavily on premium growth in the health segment.
“There is a tapering of demand for retail health insurance as people have been buying significantly in the last 2-3 years after Covid-19.
"Now, we assume that somewhere the growth will normalise due to affordability and impact of macroeconomic situation.
"On the corporate side, the health insurance rates are poor.
"The growth in health insurance will depend on new ideas, new products, innovation,” said a private sector general insurance CEO.
According to a private sector insurance executive, the spike in demand for health insurance, which was seen post-Covid-19, has started to decline.
“Earlier, there were new entrants that took insurance policies, which drove the growth in premiums.
"However, it has reduced now amid concerns of affordability, and it is largely the increase in premiums that is driving the growth in retail health premiums.
"The increased hospital costs are driving premiums due to which we are not able to cap the premiums,” he said.
Even the growth of retail health insurance premiums, which was the mainstay of the health segment, has slowed.
In the April–January period of FY25, growth in retail health insurance premiums stood at 13.51 per cent as compared with 19.04 per cent in FY24.
It was 15.07 per cent in FY23 against 17.28 per cent in FY22.
In October, the Insurance Regulatory and Development Authority of India (Irdai) revised the format of reporting premium figures and asked the insurers to report long-term premiums on the basis of 1/N, where N is the number of days of the policy.
This has also accounted for a sharp drop in the growth rate as the premiums are not comparable with the year-ago period.
“The impact of new accounting norms has primarily been in the health segment, given that motor was already recognised as per 1/N and fire is not a very large segment in terms of multi-year policies.
"15 per cent of the health policies are likely multi-year policies which have been impacted,” said Anil Gupta, senior vice-president, Co Group Head — Financial Sector Ratings, ICRA.
In FY25, there has been a sharp decline in premiums from government schemes as some of the schemes moved from insurance models to a trust-based model.
In this model, governments will pay for universal health coverage schemes directly from the trust, and no insurance company will be involved.
“Several things are playing into the decline in overall health insurance premiums.
"One of them is the new accounting norms, similarly, the shift towards the trust model from the insurance model for government-sponsored schemes is also affecting the overall growth.
"Even as the retail health insurance seems healthy at around 18-20 per cent, affordability is emerging as a key issue.
"Most of the growth in retail premiums is driven by an increase in premium, which is pushed by higher hospital costs rather than new customers,” said the official quoted above.
"Customers opting for top-up and super top-up in health insurance policies offered by their employers due to medical inflation have also increased after Covid-19.
“An increasingly large number of people today opt for a top-up cover along with their group health policy instead of buying a standalone health insurance…they prefer adding a top-up cover to their group health plan as it ensures not just enhanced coverage but also its continuity at an affordable price,” said Anup Rau, MD & CEO, Future Generali Insurance.
“The growth rate of retail health insurance remains healthy post pandemic like the previous years.
"The average sum insured including top-up stands at around Rs 17-18 lakhs in FY24 compared to around Rs 6-7 lakh before the pandemic.
"Meanwhile, in traditional policies, the average sum insured has increased to Rs 10 lakh from Rs 4 lakh,” said Siddharth Singhal, business head —Health Insurance, PolicyBazaar.
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