Recent changes by the Insurance Regulatory and Development Authority of India (IRDAI) in the insurance industry (Health insurance), are set to impact policy premiums by almost 15%. The new guidelines are supposed to reduce the maximum waiting period from four years to three years.
The changes made by IRDIA will affect most insurers, and they have to review and potentially adjust their premium rates accordingly.
Some insurers, such as HDFC ERGO, have already informed their customers about upcoming changes in premium rates. HDFC ERGO announced an average increase of 7.5% to 12.5% in premiums.
Does Health Insurance Premium Increase Every Year?
Health insurance premiums in India typically rise each year. This is driven by general inflation, escalating medical costs, age and an increased frequency of claims. Including several other factors in medical advancements. Such as new treatments, and the growing use of technology, all of which can contribute to higher premium costs. According to a LocalCircles survey, 52% of health insurance policyholders experienced a premium increase of over 25% in the past 12 months.
The Factors That are Responsible for The Increase in The Premium Rates:
Health insurance premiums often increase due to several factors. While not all of these factors may apply to one’s personal situation, many are unavoidable. Understanding what drives these increases can help you plan and choose policies with terms that minimise significant annual cost hikes.
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Age
Age-Related Risk: As someone gets older, the risk of health issues rises, which can lead to higher premiums due to the potential for more frequent or severe claims.
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Medical Inflation
Rising Healthcare Costs: The cost of medical services, treatments, and medications tends to increase over time, prompting insurers to raise premiums to keep pace with these expenses.
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Claim History
High Claim Ratio: If you’ve made significant or frequent claims in the past, insurers might hike your premium to offset the risk of future claims.
Specific Conditions: Claims for chronic or severe conditions often result in higher premiums.
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Policy Features
Enhanced Benefits: If your policy includes new benefits or coverage options, your premium may increase to reflect the improved coverage.
Riders and Add-ons: Adding riders or supplementary benefits, such as critical illness cover or maternity benefits, can lead to higher premiums.
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Change in Coverage
Increased Sum Insured: Opting for a higher sum insured will raise your premium to cover the additional risk.
Extended Coverage: Broadening your policy’s scope, such as including more diseases or adding family members, can result in higher premiums.
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Health Status
Health Deterioration: If your health worsens or you’re diagnosed with new medical conditions, your premium might increase to account for the higher risk.
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Insurance Company Factors
Claims Experience: If the insurer has faced a higher number of claims or larger claim amounts from its policyholders, it might increase premiums to maintain profitability.
Underwriting Revisions: Periodic reviews of underwriting practices and risk assessments can lead to premium adjustments.
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Regulatory Changes
Compliance Costs: Changes in regulations or compliance requirements can increase operational costs for insurers, leading to higher premiums.
Tax Implications: New or changing taxes on health insurance products can also affect premium amounts.
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Market Conditions
Economic Factors: Economic conditions, such as inflation and changes in the cost of living, can impact premium rates.
Competitive Landscape: Market competition and the financial performance of insurance companies can influence premium pricing strategies.
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Renewal Terms
No-Claim Bonuses: If your policy includes a no-claim bonus and you haven’t made claims, your premium might increase less significantly compared to a policy without such bonuses.
Policy Term: Switching from a multiyear policy to an annual policy, or vice versa, can change the premium structure.
Here are Effective Strategies to Lower the Health Insurance Premiums:
Opt for long-term plans: Insurance providers often bundle more benefits into longer-term policies, which can be more economical than monthly premiums. Choosing annual or multi-year plans not only saves money but also eliminates the hassle of frequent renewals.
Renew punctually or in advance: Remembering renewal dates can be challenging, but timely renewal is crucial. Many insurers offer discounts for early renewals, so it’s beneficial to stay updated on these opportunities.
Choose add-ons wisely: While add-ons can be advantageous, prioritize those that best suit your needs without compromising on essential coverage. Saving now could lead to financial strain during medical emergencies.
Utilize No Claim Bonus (NCB): NCB rewards policyholders who haven’t made claims with discounted premiums upon renewal. It’s a valuable way to reduce insurance costs while maintaining coverage.
Conclusion
Premium increases in health insurance policies can be attributed to a mix of personal factors (like age and health status), policy features, insurer practices, and broader economic conditions. Understanding these factors can help you better anticipate changes in your premiums and make informed decisions about your coverage.
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