Premium should be less than 10% of sum insured on a senior's health policy

The average annual increase in a senior citizen's health cover should be 4-5 per cent

The premiums charged from senior citizens on their health insurance policies are not low (see table). But what also worries senior citizens is the rate at which their insurers might hike the premiums at the time of renewal. Many of them worry that their premiums could rise to such unaffordable levels that they could be forced into abandoning their policies, just when they need them the most.

How much is the premium? As the numbers in the table tell us, the premiums can range from about 2.5 per cent of sum insured at age 60, to about 9 per cent of the sum insured by age 80 (without tax). According to Amit Chhabra, head-health business, Policybazaar, “In most cases, the premium for senior citizens should not exceed 10 per cent of the sum insured.”

There is considerable variation in premium rates among insurers. “For a Rs 10 lakh cover for someone aged 75, the lowest-cost policy costs about Rs 27,000 and the most expensive one costs around Rs 99,000,” says Kapil Mehta, co-founder and managing director, Secure Now Insurance Broker.

Policy premiums depend on several factors. “You have to see whether the policy comes with compromises or without, like co-payment, sub-limits, etc,” says S Prakash, managing director (MD), Star Health and Allied Insurance. Policies with fewer compromises cost more. Policies with a longer waiting period for pre-existing diseases, more exclusions, etc. cost less.

Pricing can be higher if a senior citizen has a pre-existing condition. “If you buy at 75 and have severe diabetes, the insurer could apply a 100-150 per cent loading on its base rate,” says Mehta.       

At what rate should prices be revised? Revisions in health insurance premiums depend on medical inflation, insurer’s claims experience, etc. But what is a reasonable rate of increase a senior citizen should be prepared to tolerate? “Expect a hike of 15 per cent at the end of three years,” says Prakash. The table along with this story also shows that entry premiums (these are not renewal premiums) rise at 4-5 per cent annually between age 60 and 80.

Insurance is a tightly regulated industry where insurers can’t revise premiums at will. “The insurer has to first convince the regulator it is incurring a loss. Only when the loss ratio rises beyond a cut-off point is a company allowed to represent to the regulator for a revision,” says Prakash.   

In a few scenarios, however, insurance buyers could face a steep premium revision. “In group policies, like those issued by banks, the hike in premium can at times be steep,” says Chhabra. Another scenario, he adds, could be when the insurer re-files its products. “Companies are allowed to revise their premiums if they are much lower than that of their peers,” adds Chhabra. When an insurer shuts down a product and transfers customers to a new product, in that case, too, the change in premium can be high.

One factor that affects the pace at which a company revises its premiums is the number of customers it has. “Insurance is a game of large numbers. Larger players can manage their losses better and can offer a cover without much revision in premiums,” says Prakash. He adds that Star Health has not revised the premium on its policies for senior citizens offering a cover of Rs 1-5 lakh for the past 14 years.    

What can you do? If you are in a policy that you think is more expensive than the rest of the market, you have the option to port. But isn’t porting a near impossibility for senior citizens? “No, it not so these days. Recently we ported a 90-year-old from a policy that had sub-limits to a policy offering more comprehensive coverage,” says Chhabra. If the senior citizen has a major ailment, then porting becomes difficult.

Senior citizens can also reduce their policy premiums by opting for co-payment and deductible (where the insured has to bear the first lakh or more himself), though these options are not advisable. “Make sure the policy provides coverage for the broadest range of ailments with limited exclusions,” says Prasun Sikdar managing director and chief executive officer, ManipalCigna Health Insurance. Also, buy a retail policy, which is more tightly regulated, instead of depending on a group policy.

“Buy a health policy at a young age, especially when you are healthy,” says Sikdar. This will help avoid the issue of loading for pre-existing diseases.

Finally, do not depend on insurance alone. “Start creating a health insurance corpus as well from a young age so that you are not dependent on your policy alone,” says Mahavir Chopra, founder, Beshak.org.