Rising Insurance Premiums And Coverage Gaps. How Indian Consumers Can Stay Ahead In 2024

The rise in premiums can be attributed to the increased healthcare costs. Medical inflation is rising the cost of treatment and hospitalisation, creating pressure on consumers and insurance providers

In the last couple of years, the health sector has witnessed fierce competition among industry players, which has prompted the creation of new and innovative insurance offerings. Image: Pexels

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By Shailesh Kumar

The Indian Insurance market is the fifth largest in the world, and the industry is growing at a rate of 10-15 per cent driven by factors such as economic growth, increased middle-class income, and rising awareness about insurance. In the last couple of years, the sector has also witnessed fierce competition among industry players, which has prompted the creation of new and innovative insurance offerings.

However, life insurance penetration is around 4 per cent, and nearly 3 per cent for health insurance, which is relatively less. Barriers like rising premiums, coverage gaps, and a lack of transparency continue to hamper consumer experience. However, as the global insurance landscape evolves to cater to the demand for coverage, it is becoming vital to manage insurance needs to stay ahead of the limiting barriers.

Impact of Rising Insurance Premiums  & Coverage Gaps

The pandemic prompted individuals to avail of insurance against out-of-pocket medical costs as a contingency. As a result, the total health insurance premium collected in India recorded a surge of 25 per cent in a year. This sharp rise in premiums can also be attributed to the increased healthcare costs. Medical inflation is increasing the cost of treatment and hospitalisation significantly, creating pressure on consumers and insurance providers.

Similarly, the changing demographics in India and the growing prevalence of chronic illnesses are increasing the number of claims. It is predicted that chronic illness will account for 75 per cent of healthcare expenditures in 2025. To cope with the surge in claim volume, insurers are increasing the premium amount.

This move is adding pressure on consumers with limited or fixed income, who are now finding it challenging to afford comprehensive cover, leading to gaps in their protection. This year, premiums could increase by 10-15 per cent, driving more consumers to seek basic products. Some may even consider lowering their insurance coverage to manage costs, leaving them financially vulnerable.

Today, exclusions of pre-existing conditions or certain treatments, inadequate sum insured in comprehensive health plans, and lack of coverage for disability, critical illness, and mental illness are seen as factors creating a coverage gap. The few policies that cover these often come with stringent terms and conditions. However, by adopting some strategies, these challenges can be addressed.

Insurance Strategies to Adopt to Stay Ahead in 2024

Reviewing insurance policy and its scope would help understand whether the products continue to meet evolving protection needs and lifestyle changes. This insight will help tweak coverage or sought add-ons for increased protection. Planning insurance early and securing coverage before major milestones or significant life changes can help avail high coverage against reasonable premiums.

It is also advised to prioritise comprehensive coverage over premiums, even if it means paying slightly higher amounts to avail adequate protection. However, individuals should be mindful to select a plan with a premium amount that suits their payment capacity, so that they can pay it on time.

An ideal insurance portfolio featuring products such as life, health, property, and motor coverage can help ensure comprehensive protection for every life aspect. This will ensure preparedness in the face of emergencies beyond health, offering peace of mind to the insured and their family members.

The government’s push for the 'Insurance for All by 2047' initiative is evident through its bevy of schemes such as Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB PMJAY), PM Suraksha Bima, and PM Jeevan Jyoti Yojana. Under AB PMJAY, the government aims to offer health coverage to 5 lakh families annually for secondary and tertiary care hospitalisation. Also, the industry regulator, the Insurance Regulatory and Development Authority of India (IRDAI) is emphasising the creation of basic and low-cost products across life, health, and general categories to improve their accessibility for consumers. Individuals can leverage these center-backed insurance schemes or basic plans to meet their coverage needs.

Matching the pace with digital advancements in the insurance sector, individuals must learn how to make the most of digital tools and platforms. Today, individuals can easily use tools like insurance calculators to compare insurance products and use apps to manage their policies, track payment status, and check maturity dates. Individuals must make it a point to stay updated with industry developments, become familiar with insurance terminologies, and learn more about the features of different products to use such tools easily.

These strategies can help understand the scope of insurance in changing times and help consumers stay ahead in 2024. Additionally, reassessing coverage needs and adjusting them regularly will help navigate changes better.

The author is the co-founder and insurance head at Insurance Samadhan.

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