Health insurance demand has crossed the roof, supplemented by higher medical inflation. People want a bigger sum insured to secure their future.
Medical inflation refers to the increase in the cost of healthcare services over time. It can have a significant impact on your insurance premium. As medical costs increase, insurance companies pay more to cover the costs of medical treatments and procedures. This increased cost is typically passed on to policyholders in the form of higher insurance premiums.
For example, if you have a health insurance policy that covers hospitalisation and surgery, and the cost of these services increases due to medical inflation, your insurance company will have to pay more to cover these costs. To make up for these increased costs, your insurance company may increase your premium at the time of policy renewal.
Moreover, consumer prices in India has eased as the country’s CPI inflation in February 2023 slight slowed to 6.44 per cent. However, the retail inflation, based on the Consumer Price Index (CPI), remains beyond the RBI’s tolerance limit of 6 per cent for the second consecutive month. The retail inflation had stood at 6.52 per cent in January 2023.
Medical Inflation And Its Impact
Aniruddha Sen, co-founder, Kenko Health, said medical inflation is skyrocketing with each passing day. In simpler terms, the costs associated with healthcare are rising steeply. This ranges from the rise in costs of medicines and doctor consultations to hospitalisation, lab tests, and surgery procedures.
“India’s current medical inflation rate is 14% – the highest amongst Asian countries in 2021. In 2023, a further 10% rise is foreseen. With healthcare prices shooting up and purchasing power dipping, this hike directly affects the insurance industry – leading to increased insurance premiums,” Sen said.
Sen highlighted that an increase in demand for healthcare services can be noted post COVID-19. These are further fueled by factors such as lifestyle changes, long-term diseases, the emergence of new ailments, and a higher rate of sudden sickness. This has brought about a rapid evolution in the industry.
Health insurance demand has crossed the roof, supplemented by higher medical inflation. People want a bigger sum insured to secure their future.
“Less often do they realise that the opposite is happening – the insurance premium rate is increasing. “
“Let us explain this. As the average claim amount rises, insurance companies face the challenge of managing substantial loss ratios. In the interest of battling this dip, they end up increasing the premium”.
“Doing the maths, these intertwined causes get us stuck in a loop. These form a chain of factors directly proportional – from the grassroot level of lifestyle changes to the global healthcare landscape. However, it’s not all bad news for policyholders as insurers are also working to compensate for this trend by offering better claims and services. This can mean faster claims processing times, better customer service, and plenty of tailored coverage options,” Sen added.
Read More: Good news for bank fixed depositors! RBI hints at further FD interest rate hike
Role Of Insurance Companies
Sen highlighted that insurance companies know that customers value services and are willing to pay a higher premium. By offering improved services, insurers can maintain their competitive edge in a crowded marketplace.
Sen added, according to a report by Deloitte, insurance companies are also investing in technology, such as data analytics, automation, and Artificial Intelligence to improve underwriting and claims processing capabilities. The reports generated from the analytics are helping insurers assess risks and improve claims handling efficiency, further helping to improve customer satisfaction and retain them.
While inflation may be causing premiums to rise, healthcare providers are countering them by offering newer services, focusing on improved customer service, broader coverage options, and technology investments to maintain their competitive edge and keep customers satisfied, Sen added.
