The price of health insurance in India is escalating as providers face increased payouts brought about by COVID-19, while regulatory changes have forced them to reduce the number of exclusions on policies. This increases the risk of pricing out customers, particularly older age groups who are more vulnerable to health conditions and complications.

Many citizens in India choose to take out private health insurance, while others pay upfront for private treatment as an out-of-pocket expense. This is because the country’s universal healthcare system is underfunded and characterised by severe shortages of staff and facilities. According to GlobalData’s 2020 Financial Services Consumer Survey, 73.9% of adults in the country hold a private health insurance policy. Uptake is highest among those aged between 25 and 54, and lowest among those in the 18–24 cohort.

Earlier this year, the Insurance Regulatory and Development Authority of India (IRDAI) mandated insurers to develop COVID-19-specific health insurance plans known as “Corona Kavach.” Such policies have become very popular – demand for health insurance products mounted as the virus spread at pace in the country.

The pandemic has led to an upsurge in claims and significantly increased the value of payouts. While claims for other medical interventions fell at the start of the pandemic, these are now rising in number – and insurers are passing on the cost to customers. Beshak.org, an independent insurance awareness platform, estimates that premiums are up by 25–35% on average this year. The hike in premiums has been more pronounced for older customers, with premiums rising by up to 75% for these individuals.

While COVID-19 has certainly contributed to an increase in the price of premiums, so has IRDAI. Since September 2019, insurers must follow IRDAI’s standardisation of exclusions. As a result, health insurers cannot exclude certain illnesses from their policies, meaning coverage has broadened.

Unlike most countries where customers typically see a rise in premiums every year at renewal, policyholders in India see the price of their premiums revised every five years. While interest in health insurance is expected to remain high – particularly as the pandemic has increased awareness of the cost of medical treatments – the hike in premiums could price out new customers as well as those facing renewal. Older individuals, who arguably need heath insurance the most, are most likely to be affected as they are the most exposed to the sharpest increase in premiums.