Health insurance companies are increasing medical inflation rates and boosting claims

In response to increasing medical inflation, health insurance premiums are being raised by insurance companies.

Effective November 11, 2024, New India Assurance, the largest general insurer in the country, is planning to raise premiums by 10% for certain health insurance products.

Many life and health insurance companies in India have recently elevated their premiums. Notable adjustments include HDFC Life Insurance increasing term insurance premiums by around 5% for individuals over 60 years old, Max Life Insurance adjusting premiums with increases ranging from 1-6% across different age groups, Bajaj Allianz Life Insurance raising premiums by 1-5%, and Tata AIA Life Insurance increasing premiums by 3-10%.

The increase in New Assurance premiums is a response to the expanded coverage from the Irdai circular, leading to higher anticipated claims, and benefitting policyholders. The Irdai’s master circular brought significant changes, including reducing the waiting period for pre-existing diseases from 48 months to 36 months and shortening the moratorium period from eight years to five years.

This development illustrates broader economic and industry-specific factors, including the need to reset premiums to ensure the sustainability of insurance products. Medical inflation, often two to three times the normal inflation rate, significantly impacts insurance claims and payouts, requiring premium adjustments.

Several other factors contribute to the rising premiums. Increased claim frequency, due to an aging population and a rise in chronic diseases, has led to larger payouts from insurers. Advancements in medical technology, while resulting in better treatments and outcomes, also come at a higher cost, which insurance companies consider in their premium calculations. Regulatory adjustments by Irdai, particularly those supporting senior citizens with pre-existing conditions, also influence premium rates.

These changes highlight the ongoing challenges faced by the insurance industry in balancing affordability with comprehensive coverage amidst rising healthcare costs and regulatory shifts.