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

HDFC Ergo is increasing premiums, Star Health is increasing premiums by 10-15% for 30% of its policies, Niva Bupa and New India are also increasing rates.

After HDFC Ergo General Insurance increased premiums on its core health insurance products 'Optima Secure' and 'Optima Restore' from August and Star Health and Allied Insurance announced a 10-15% hike in premiums on 30% of its products, Niva Bupa is now increasing premiums on 'Health Companion', one of its oldest products. Incidentally, New India Assurance, the country's largest general insurer, has increased premiums on some of its products by 10%, which will come into effect from November this year.

Reasons for premium increases

Health insurers and industry observers said premiums will be increased from April this year due to rising medical inflation and reduction in waiting period for pre-existing conditions from four years to three years. The insurance regulator has also reduced 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 specified in the policy.

“Like general inflation, medical inflation is a reality. The cost of treatments has been rising, and it has been rising faster than general inflation. We have revised the premium for Health Companion and made efforts to ensure that these revisions remain as low as possible and continue to be affordable, while at the same time outpacing inflation,” Niva Bupa said this in a message to its policyholders.

Anand Roy, Managing Director and CEO of Star Health and Allied Insurance, said during the company's first quarter 2024-25 earnings call that the company plans to increase prices across about 30% of its product portfolio.

“We are planning a price increase of over 30% of our current portfolio and the average price increase we are targeting is between 10 and 15%. So roughly somewhere between 4% of the total portfolio,” said Aditya Biyani, Chief Strategy and Investor Relations Officer. Health of the Stars during the quarterly results conference call.

During the Covid pandemic, claims skyrocketed and the health insurance sector suffered losses, leading to a sharp increase in premiums across the industry. Although health insurers are now profitable, medical costs remain high. This has led health insurers to increase premiums on several popular policies for the second year in a row.

“But yes, there are concerns on that side. And that's why the bigger question of product pricing actually needs to be considered and that's exactly what we're doing with the plans we have for some of the products,” Biyani said when asked about the increased hospital prices that continued even after Covid.

“But there are certain conditions that can have long-term implications for pricing. For example, shortening the moratorium period, shortening the pre-existing conditions periods and so on. So we will make price increases if necessary. We are looking at the impact of these changes on the larger products,” said Star's Roy.

Overall, 52% of health insurance holders reported that their premiums had increased by over 25% in the past 12 months, according to a survey conducted in May this year by LocalCircles, a governance, public and consumer interest polling firm. In fact, 21% of health insurance holders reported that the premium increase in the 12 months prior to May was 50% or more, while 31% reported an increase of 10-25%.

Regulatory measures and future prospects

The Insurance Regulatory Development Authority of India (IRDAI) has initiated several measures to make health insurance more consumer-friendly, including reducing waiting periods and cancellation fees for policies and encouraging the adoption of products for all types of treatment, including outpatient treatment.

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