India's health insurance sector is booming, and it's not just due to pandemic

India’s growing health insurance industry seems to be undergoing a sea change in its style of functioning. 

With a market size of ₹82,019 crore in 2023, the medical insurance sector has been witnessing a burgeoning growth after the pandemic. A report by CareEdge says the segment is on track to breach the ₹1 lakh-crore mark in FY24. 

And, it is not just the pandemic that triggered this growth. Speaking to The Federal, Santosh Puri, Senior Vice-President – Health Product and Process, Tata AIG General Insurance, said: “Although the pandemic triggered the need for health insurance, there are other factors that have led to the steady growth in demand in the years that have followed. For one, both the government and the industry have been working continuously to increase health insurance penetration. Also, high healthcare costs, enhanced access to quality healthcare facilities, advancements in the medical field, and high medical inflation rates have contributed substantially to this growth.”

What the numbers suggest

As per the report, standalone private health insurers (SAHI) continued to display growth as May 2023 numbers touched ₹2,098.2 crore, up from the ₹2,084.2 crore in April 2023, and ₹1,706.6 crore in May 2022. 

This year-on-year growth of 22.9 per cent in May 2023 was lower than the 23.4 per cent reported in May 2022. However, the first two months of FY24 – April and May — reported a greater growth rate of 28.4 per cent as compared to the corresponding period in the previous year (growth rate of 26.1 per cent).

Also read: Average health insurance claims in India Rs 42,000: Report

Retail and group health insurance witnessed growth of 18.2 per cent and 26 per cent, respectively. For May 2023, private companies reported growth of 21 per cent, while public sector non-life insurance companies posted growth of 13.2 per cent.

Dynamics changes

The surge in the industry’s market size has been accompanied by a few changes in the dynamics. For one, the customer profile seems to have changed.

Jagjeet Siddhu, Chief Distribution Officer, Kotak Mahindra General Insurance Company, told The Federal: “One key trend we have noticed is that customer awareness has increased, and the pitch for health insurance is easier as compared to the pre-pandemic period. Also, we have seen greater interest in the younger populace, as compared to earlier when health insurance largely appealed to a 35-plus audience.”

Correspondingly, there has been a substantial increase in the number of policies sold. “We have seen a year-on-year growth of around 50 per cent in policies sold in the last three years,” said Siddhu.

The younger health insurance buyers are also tech savvy and prefer digital modes of purchases. Puri of Tata-AIG health insurance said: “Customers are now increasingly aligned to digital modes of purchase and prefer do-it-yourself (DIY) platforms to purchase policies, track claims and post other service requests.”

Health insurance products have also become diversified and technology has been upgraded. “We have launched multiple products to cater to different segments and consumer needs. There is a strong focus in terms of digital business and online outreach, while strengthening our D2C presence,” he added. Technologies such as Artificial Intelligence, Machine Learning, Big Data Analytics, and the Internet of Things (IoT) are being used to improve the risk assessment and insurance processes today.

Also read: Indian health insurance market expands amid rising premiums

Some industry players have also launched ‘customised’ health insurance plans that can be specifically made to address the customer’s profile and requirements.

Hike in premium amounts

Explaining the reason for the increase in premium amounts, Puri said: “The factors that impacted costs in health insurance premiums are the significant influence of the pandemic on all business segments, including health insurance, the adoption of new-age methods of treatment and diagnosis, and the increase of non-communicable diseases (lifestyle diseases).”

Moreover, there will be closer monitoring of the industry soon, he added.

Siddhu pointed out that price is a function of underwriting risk and the huge surge in claims during the pandemic put pressure on pricing. “High-claim instances like the pandemic pushed prices upwards. The industry is trying to balance risk and prices, since price hikes will affect demand,” he added.