In some cases, rising costs have discouraged consumers from purchasing a new insurance product or continuing with existing ones.
Major industry players including HDFC Ergo, Star Health, Niva Bupa and New India Assurance have announced increases in their premiums.
Recent premium increases
Several major insurers have increased their premiums:
HDFC Ergo General Insurance It has reportedly increased the premiums of its flagship health insurance products, ‘Optima Secure’ and ‘Optima Restore’, effective August 2024.
Star Health and Allied Insurance also plan to increase premiums by 10-15% for 30% of their policies.
Besides, HDFC Life Insurance has increased its term insurance premiums approximately 5% for people over 60 years of age.
Max Life Insurance also increased premiums by 1-6% across different age groups.
Bajaj Allianz Life Insurance has increased its term insurance premiums by 1-5%.
Tata AIA Life Insurance recently increased its term insurance premiums by 3-10%.
So why are premiums increasing?
High medical inflation
India currently has the highest medical inflation rate in Asia at 14%.
This significant increase in medical costs directly impacts insurance premiums.
Shilpa Arora, Co-Founder and COO, Insurance Samadhan, explains, “Medical inflation is driving up the cost of healthcare across the country. This pressure is forcing insurance companies to adjust premiums to meet the rising expenses.”
Increase in the frequency of complaints
The frequency of insurance claims has increased, driven by an increase in chronic diseases such as cancer, diabetes and heart disease.
In an earlier conversation with CNBC-TV18.comRahul Mishra, co-founder and director of Policy Ensure, says, “Aging populations and increasing chronic diseases are leading to higher claim payouts, which in turn translates into higher premiums.”
To meet rising claims, insurers are inflating the cost of premiums and other charges across all major insurance categories.
Rising costs of treating seasonal diseases
Policybazaar data shows a 150% increase in the average size of seasonal illness claims over the past three years.
Diseases such as dengue, malaria and gastroenteritis have pushed up average treatment costs to ₹1.5 lakh, which now accounts for 33-40% of all seasonal disease claims.
Operating costs and technological adaptation
Insurers also face higher operating costs.
However, there is a growing shift towards technology-driven solutions, or insuretech, that aim to reduce operating expenses and potentially lower premiums in the future.
Are companies planning anything to stop this amid IRDAI’s call?
He The Insurance Regulatory and Development Authority of India (IRDAI) has urged insurers making products more affordable as part of its “Safe for All” vision by 2047.
This includes ordering companies to improve their underwriting processes and risk management strategies.
According to Arora, many insurance companies have been taking steps to address consumer complaints.
“For example, major insurance companies have launched new products with better underwriting conditions and healthy risk pools. They are encouraging existing customers to switch to these new products to maximise the benefits of insurance coverage,” he told CNBC-TV18.com.
There has been a noticeable shift in attitude towards using technology-driven solutions.
This increasing shift toward insurance technology can help insurance companies reduce their operating expenses, the benefits of which can translate into lower premium amounts for customers.
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