From HDFC to Star Health: Health insurers boost premiums to combat inflation

HDFC Ergo raises premiums, Star Health to hike premiums by 10%-15% for 30% of its policies, Niva Bupa and New India also to increase rates.

After HDFC Ergo General Insurance that raised premiums for its flagship health insurance products ‘Optima Secure’ and ‘Optima Restore’ from August and Star Health and Allied Insurance said it is planning to increase premiums by 10%-15% for 30% of its products, Niva Bupa is hiking the premium for ‘Health Companion’, one of its oldest products. Incidentally, New India Assurance, the country’s largest general insurer, has enhanced the premium for some of its products by 10%, which would be effective from November this year.

Reasons behind premium increases

Health insurers and industry observers said that premiums are being increased due to the rise in medical inflation and the reduction in waiting period for pre-existing diseases from the earlier stipulation of four years to three years from April this year. The insurance regulator has also lowered the moratorium period from eight years to five years from April. This means that policyholders who have paid premiums continuously for five years will be entitled to have all their claims paid by the insurer up to the limits prescribed in the policy.

“Like general inflation, medical inflation is a reality. The cost of treatments has been going up, in fact faster than general inflation. We have revised the ‘Health Companion’ premium and have taken efforts to ensure that such revisions stay as low as possible and continue to be pocket friendly while beating inflation,” Niva Bupa said in a communication to its policyholders.

Star Health and Allied Insurance’s managing director and chief executive officer Anand Roy said that the company was planning a price hike in approximately 30% of its product portfolio during the company’s Q1 earnings call for 2024-25.

“We're planning to take the price hike at about 30% plus of our current portfolio and the average price hike we're looking at is between 10% to 15%. So roughly about anywhere between around 4% on the overall portfolio,” said Aditya Biyani, chief strategy and investor relations officer, Star Health during the earnings call.

During the Covid pandemic claims surged and the health insurance sector incurred losses resulting in a hefty industry-wide increase in premiums. Though health insurers are profitable now, medical costs continue to remain high. This has resulted in health insurers hiking premiums for several popular policies for the second consecutive year.

“But yes, there is a concern on this side. And therefore, the larger issue of pricing of products effectively has to get that, and that's what we are doing with the kind of plans we have on some of the products,” Biyani said when asked about the elevated level of hospital rates that has continued even after Covid.

“But there are certain conditions, which may have long-term impact on the pricing. For example, reduction in the moratorium period, reduction in the pre-existing disease periods and so on. So, we will take price increases if required. We're looking at the impact of these changes in the larger products,” Star’s Roy said.

In all, 52% of health insurance policyholders said that their premium has increased by over 25% in the last 12 months, according to a survey conducted by LocalCircles, a pollster on issues of governance, public and consumer interest, in May this year. In fact, 21% of health insurance policy owners indicated that the increase in premium was 50% or more in the 12 months preceding May while 31% indicated an increase of 10%-25%.

Regulatory measures and future outlook

The Insurance Regulatory Development Authority of India (IRDAI) has initiated several measures to make health insurance a lot more consumer friendly. This includes lower waiting period and cancellation charges for policies and advocating the introduction of products for all types of treatments including OPD (out-patient treatment). 

Allirajan M is a journalist with over two decades of experience. He has worked with several leading media organisations in the country and has been writing on mutual funds for nearly 16 years.