Medical inflation, high coverage drive up ticket sizes for retail health insurers

The average ticket size of retail health insurance in India has increased by nearly 48 per cent over 6 years due to elevated medical inflation and increased demand for higher coverage policies among policyholders.

According to data by online insurance broker PolicyBazaar, the average ticket size of retail health insurance in India has increased to Rs 26,533 so far in FY24, up 48.22 per cent from Rs 17,900 in FY19.

This increase is attributed to a rise in medical inflation and increased awareness about health insurance among the public post the Covid-19 pandemic.

“The jump in average ticket size could be because of medical inflation in the country which is about 14 per cent to 15 per cent and the health insurers follow suit by increasing the premiums for health insurance policies.

"Secondly, more and more people are buying a longer term policy as it will cover long term,” said Siddharth Singhal, business head (health insurance), PolicyBazaar.

According to a recent report by insurtech Plum, India’s medical inflation has reached 14 per cent, posing a financial strain on individuals who bear their own healthcare expenses.

“One of the main factors contributing to the jump in average ticket size for health insurance is the rising cost of healthcare services, treatments, and medications.

"Also, the introduction of new technologies and treatments lead to higher healthcare service costs.

"As health care expenses increase, insurance premiums are adjusted to cover these higher costs, resulting in higher average ticket sizes.

"Similarly, greater utilisation of healthcare services, rise in the aging population lead to higher demand for healthcare services,” said Bhaskar Nerurkar, Head- Health Administration Team, Bajaj Allianz General.

Voicing a similar opinion, Dhirendra Mahyavanshi, CEO and co-founder of Turtlemint said, “After the Covid-19 pandemic, more people are choosing health insurance plans with higher coverage. Customers are more aware of the financial impact of unexpected health issues.”

The growing public awareness has prompted health insurers to increase the sum insured.

According to an insurance official, the industry has introduced ‘higher sum insured’ offerings in the market ranging from Rs 2 crore to Rs 5 crore as well as ‘unlimited sum insured’ plans.

Sum insured is the limit up to which a health insurer will pay for the medical expenses covered under the customer’s policy.

High sum insured allows individuals to avail high-end and expensive medical treatments without any limit.

According to Rakesh Jain, CEO, Reliance General, “The average sum insured, which used to be between Rs 2–Rs 3 lakhs, 5 years ago has seen a nearly 300 per cent jump with more people opting for sum insured of Rs 10 lakh and above.”

After Covid-19 pandemic, health insurance has dominated the market share of the overall Gross Direct Premium Underwritten (GDPI) of the non-life insurers overtaking the motor insurance segment.

As of January 2020, health insurance accounted for 26.5 per cent of the total premium, while motor insurance constituted 36.1 per cent.

In comparison, as of January 2024, health insurance had risen to 37.72 per cent, while motor insurance dropped to 30.95 per cent of the overall market share.

Going forward, insurers expect a moderation in health insurance premium rates on the back of actions taken to increase transparency and reduce fraud.

“Favourable regulations like Cashless Everywhere, which aims to reduce fraud and foster transparency between hospitals, insurers and standardisation of procedure rates, will result in a reduction in incremental costs, thereby finally resulting in a moderation of the premiums rate increases.

"However, this moderation will only happen if the number of individual policyholders see a healthy growth from the present number of nearly 5.3 crore,” said Parthanil Ghosh, president retail business, HDFC ERGO General Insurance.