A few editions ago we began a series on how to decide the right policy cutting through differences in offerings and insurers, not to speak of premium rates.
Health insurance premium rates have gone through the roof in the last few months and I have received several shocked calls asking why and wondering if it will be affordable in the future if this is the trend. Both questions are valid and so is the third set of questions that is cropping up: Will one option be to forego health insurance and maintain a fund of my own? Here are quick and simple answers to these threads:
Why the increases in premium Insurers say hospital bills have risen. Medical inflation in India is pegged at 13-14% per year, more than twice the overall inflation rate. This includes treatment and medicine cost and hence, of insurance premiums. So, we pay more as health premium. Since we invariably bear some part of the treatment cost despite insurance, that inflation affects us directly as well.
One solution can be to seek lower cost healthcare. Opting for treatment at a government or community hospital that charge less or nothing and signing up for free or low-cost group cover or government run insurance schemes where available. Not all options will be acceptable to everyone, but there they are.
The next question is where is the premium spiral going and will it be affordable at all, especially as income stagnates often and reduces post retirement. We have looked at this question more than once in CoverNote and the significance today is that the current jump in premium, 40-50% at least and rising to 75%, has brought this crisis forward way earlier than anticipated. What is more, since it is across companies, your insurer is not that disturbed if you contemplate porting out your policy.
If you have a compromised health history or are in your fifties or over, they are quietly letting you check out your porting options since 1. You are anyway a liability for them going forward, 2. They are not allowed to refuse a renewal and 3. You may well find porting is not such an easy or assured process and you may just decide to stay with current insurer.
The last point is the insurer you seek to port to will make underwriting decision from scratch. While it has the obligation to protect coverage terms and benefits accrued in your policy such as waiver of pre-existing conditions, it can charge a premium as per its risk assessment or even decline your proposal.
Porting, no solution
I have seen cases where porting is a non-starter and customers decide to stick with the current insurer. At least with the current insurer, they cannot be denied renewal for life, however costly the policy becomes.
The third option, ‘why continue with a health insurance policy?’ is cropping up more often in these conversations. There is no easy answer. If you have a ₹10 lakh policy, you are protected for the sum each year you pay premium. Without a policy, you need to have your own funds ready. As it is, hospital bills may exceed coverage in one or more years and you are on your own anyway for that. The bottom line is, premium is always cheaper than claim. Even today, as we visibly see the gap between premium and sum insured shrinking, the painful reality is the premium is cheaper, even when it is costlier! The cost to benefit of health cover becomes clear only after years, maybe after a lifetime even. Since we cannot predict what health challenges will befall us, we need to plan for the implications of advancing age like longevity and increased and more expensive medical treatments. Those are broad outlines of the dilemma.
(The writer is a business journalist specialising in insurance & corporate history)
Published – August 11, 2025 06:29 am IST
