Health insurance premiums have, on average, risen 4.78 per cent year-on-year in the third quarter of 2022, according to PolicyX.com’s health insurance price index. The index, computed by factoring in price changes by five leading insurers (across age groups and sum insured) is an average figure. Many customers would have experienced much higher premium hikes--of 20-40 per cent--over the past year.
Adverse claim experience
One key driver of premium hikes is insurers’ adverse claim experience. “Both, the number and the average size of claims rose during the pandemic,” says Kapil Mehta, co-founder and chief executive officer (CEO), SecureNow.
The pandemic, say experts, drove costs up within the healthcare ecosystem. “Market sources tell us that medical inflation, which used to be about 15 per cent, has risen even higher,” says Debashish Roy, head-point of sale business, Anand Rathi Insurance Brokers.
Many insurers revise their premiums in an erratic manner. “The average annual increase tends to be 5-8 per cent. But many insurers keep their premiums constant for, say, three years and then hike them by 20-25 per cent at one go,” says Naval Goel, founder and CEO, PolicyX.com.
Sometimes, a large hike occurs due to faulty pricing at the initial stages. “Two to three years after launch, an insurer may realise that it had set the initial premiums too low,” says Goel.
Underwriting practices affect an insurer's claim experience. “An insurer with lax underwriting standards could onboard too many customers in poor health condition and then have a more adverse claim experience. Such an insurer will be forced to undertake larger premium hikes,” says Mehta.
Avoid knee-jerk reaction
Assess the rise in premium over three years instead of one. “If it is 5-6 per cent annually and is in line with the increase by other insurers, you will have to accept it,” says Goel.
Also check if you have moved into a higher age band. When that happens, the jump in premium is substantial.
Consider porting
If, however, you conclude that the hike is unjustified, consider porting to another insurer whose premium is more reasonable. “Regulation allows you to move to another insurer’s plan without losing your waiting period benefits. However, begin the process of porting at least a month before your existing policy is up for renewal,” says Mehta.
Before porting to an insurer, check when it last hiked its premiums. “It shouldn’t happen that after you move to an insurer, it hikes its premium a year later,” says Goel.
Combine base plan with top-up
The sum insured must be enhanced in line with rising healthcare costs. Instead of increasing the sum insured on your base plan, consider buying a super top-up plan. “If you live in a metro, go for a base plan of Rs 10 lakh and a super top up of Rs 10 lakh (or more, depending on affordability). The total premium of the combo will be lower than of a Rs 20 lakh base plan,” says Goel.
Cost-effective features
Features like recharge and guaranteed no claim bonus (NCB) can make your plan more cost-effective. “If you have the recharge feature and your sum insured gets exhausted, the insurer refills it with the same amount. Guaranteed NCB means your sum insured keeps on increasing annually even if you make a claim,” says Roy.
Many policies offer wellness benefits. By walking a certain number of steps during a year, you can earn a discount at the time of renewal.
Nowadays, you can pay the premium for three years at one go. Even if the insurer hikes the premium during those years, you are shielded.
Cost-conscious customers may also opt for Arogya Sanjeevani, the standard indemnity cover mandated by the regulator. “While it comes with sub-limits, the premium is relatively lower,” says Roy.
Finally, at the time of purchasing a policy, compare premiums not just for your own age but across age bands. “Some insurers keep the premium rates lower at a younger age but hike it steeply for older age groups. Others hike premiums more smoothly across age bands,” says Mehta. Opt for the latter type of pricing.