Impact of inflation: health insurance becomes more expensive, people may opt for less coverage

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As the COVID-19 pandemic has heightened consumers’ awareness of the need for health insurance coverage on the one hand, insurers raising premiums could act as a drag on a portion of people buying a policy. on the other hand, in a context of inflationary pressures.

“It is true that several health insurers have increased their premiums by 10 to 15% on certain products. The increase in premiums is due to the high number of claims received by insurers over the past two years. Typically, insurance companies increase premiums when their healthcare product shed rates increase,” said Rakesh Goyal, Director of Probus Insurance Broker, a digital insurance broker.

In the last financial year (2021-22), insurers paid out COVID-19 related claims worth ₹25,000 crore compared to around ₹8,000 in the financial year 2020-21. With such an explosion in claims, premiums needed to be increased as health care costs rose and insurance companies refrained from raising premiums due to the pandemic, he said.

According to a report by Motilal Oswal Financial Services, among Asian countries, India experienced the highest medical inflation rate of 14% in 2021, followed by China (12%), Indonesia (10%) , Vietnam (10%) and the Philippines (9%).

High loss ratios along with medical inflation have caused insurance companies to raise prices for retail and group health plans. While new customers have been hit by the price hike, existing customers have suffered a double whammy of age-related increases and price hikes, he added.

According to Motilal Oswal, for a health insurance scheme offered by a public sector insurer with an insured sum of ₹8 lakh, covering an adult aged 68, the premium had risen to ₹59,640 in FY22 , up from ₹40,195 in FY21.

In the same company, for an adult aged 30, a health policy with sum assured of ₹2 lakh, the premium increased only marginally to ₹4,559 in FY22 from ₹4,341 in FY22. of FY21, he noted.

Similarly, at a private insurer, the health plan for a 42 year old covering two adults and two children with an insured sum of ₹8 lakh, the premium rose to ₹28,977 in FY22 from ₹27,598 in FY21 , according to the report.

S. Prakash, managing director of Star Health & Allied Insurance, pointed out that towards the end of last fiscal year, his company increased premiums for some products by an average of 9-10%. “We took a review after more than 3.5 years. Medical inflation is here, but price revision alone cannot be the solution to medical inflation. In proportion to medical inflation, we cannot continue to increase the premium. Rather, we need to bring some efficiency to claims management and customer service and we are working in that direction,” he stressed.

Mr. Prakash said retail health insurance penetration was less than 10%.

“Health insurance is a game of big numbers. As more people are covered, premium increases will not occur frequently,” he said.

Mr Balasubramanian, a retired human resources professional, said his son recently renewed the policy covering the parents and the premium was increased from ₹30,000 to ₹34,000. He said if there were to be constant hiking it would make it unapproachable.

Consumer activist T. Sadagopan said higher premiums were only part of the problem and alleged the other part was linked to inflated medical bills by some hospitals and many claims being rejected on various grounds. .

Saurabh Bhalerao, Associate Director, BFSI Research, Care Edge Ratings pointed out that the health insurance segment saw premiums increase by 27.4% to ₹8,695.2 crore in April 2022 from ₹6,824 crore in April 2022. April 2021. “While rising premiums may make some health insurance products more expensive, some people may opt for less coverage to counter inflation, even if they retain some health insurance coverage,” a- he declared.

Naval Goel, founder and CEO of PolicyX.com, an online insurance marketplace, said the rise in health insurance premiums was not significant and stressed that customers should expect higher premiums. each year due to inflation and health care costs.

If one insurer has raised the premium and others are offering similar coverage at a lower premium, customers may consider transferring the policy, Probus’ Goyal pointed out.

“Clients should also opt for an optimal combination of a basic cover and a super top-up, instead of continually increasing the sum insured on their basic cover. This can help reduce the premium cost by 20-25%, but proper due diligence must be done,” he said.

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