As healthcare costs continue to climb in India, residents are facing higher premiums due to a combination of factors, including increasing demand for sophisticated treatments, rising labor costs, and the growing prevalence of chronic diseases.
Industry experts predict that this trend will persist, with premiums set to rise further to keep pace with escalating medical expenses. According to Abhishi Bhatia, an associate partner at McKinsey & Co., the outlook for the next few years remains grim. “I don’t see this trend reversing in the next two to three years,” Bhatia told Insurance Asia. “It will continue upward.”
A report from Willis Towers Watson Plc estimates that medical costs in India will increase by 13.2% this year, surpassing the 12.3% projected for the Asia-Pacific region.
A key factor behind the rising costs is the rapid advancement in healthcare technologies. For instance, robotic surgeries have become more widespread in recent years, and the adoption of more sophisticated treatments has driven up expenses, explained Amit Chhabra, Chief Business Officer at Policybazaar Insurance Brokers Pvt Ltd. Speaking via Zoom, Chhabra highlighted that the average hospitalization cost has doubled since 2020, now standing at $920 (₹80,000).
“More complicated treatments are now being conducted in India, treatments that previously required patients to travel abroad,” Chhabra added.
Despite a significant increase in health insurance premiums over the past year, the number of new and renewed policies has not declined sharply. Amitabh Malhotra, Executive Director at Capco India, pointed out that high- and middle-income consumers, who are more aware of the risks of not having insurance, have largely retained their coverage. However, rising premiums may push low-income consumers to drop their policies, which could negatively impact insurance penetration in that segment.
According to the Insurance Regulatory and Development Authority of India (IRDAI), India’s overall insurance penetration dropped from 4% in fiscal year 2022-23 to 3.7% in 2023-24. Life insurance penetration also fell from 3% to 2.8%, while non-life insurance remained stable at 1%.
Another concerning trend is the increasing incidence of chronic illnesses among younger populations. Chhabra noted that more young people are now being treated for conditions such as heart disease, which adds to the burden on the healthcare system.
Amid these challenges, the Indian government is exploring policies to address the issue. There are proposals to allow insurers to offer both life and non-life products, and the government has also approved full foreign ownership of insurance companies. These developments are being closely watched by investors, particularly global insurers eyeing India’s burgeoning health insurance market.
“There has been a significant uptick in conversations with global insurers, especially those looking to enter the health insurance sector, as they see it as an opportunity to scale rapidly in India,” said Bhatia.
To alleviate the pressure of rising medical costs, Malhotra suggested that state interventions, such as capping prescription drug prices, improving public healthcare infrastructure, and promoting generic medicines, could help mitigate inflation in the sector.
Chhabra emphasized the growing importance of health insurance as a necessity. “People realize that health insurance is mandatory,” he said. “At the same time, the cost of healthcare is rising, making health insurance even more essential as a product.”
Despite the challenges, the future looks promising for India’s health insurance industry. Chhabra forecasts a positive outlook in the next five years, while Bhatia cautioned against overly optimistic expectations. “There is positive momentum, but India has yet to fully embrace preventive care, and I don’t expect a significant shift in the next two to three years,” Bhatia concluded.
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