Health insurance in India needs urgent reforms

1. Coverage Distribution and Premium Imbalance

Disparity in Coverage vs Premium Share

• Retail Health Insurance:

  • Covers 5.58 crore lives

  • Generates ₹41,501 crore (39%) in premiums

  • Average premium: ₹7,437

• Group Health Insurance:

  • Covers 25.59 crore lives

  • Generates ₹55,666 crore (52%) in premiums

  • Average premium: ₹2,175

• Government Schemes:

  • Cover 26.11 crore lives

  • Generate only ₹10,513 crore (9.8%)

  • Average premium: ₹402

High Loss Ratios Across Segments

• Overall incurred loss ratio: 88.15%

• By segment:

  • Group health: 94%

  • Government schemes: 115.28%

  • Individual health: 75%

• Implication: Public-funded schemes are financially unsustainable in current form.

Insurer-Wise Claims Experience

• Public sector insurers: 103% incurred claims ratio

• Private insurers: 89%

• Standalone health insurers: 65%

• Insight: Reflects differing risk appetites and pricing models

2. Geographic and Provider Concentration

Urban-Centric Premium Collection

• 64% of premiums come from just five regions:

  • Maharashtra (29.5%)

  • Karnataka (11%)

  • Tamil Nadu (10%)

  • Gujarat (7%)

  • Delhi (6.5%)

• Concern: Geographic skew limits national risk pooling.

Private Sector Dominance in Care Delivery

• Urban hospitalisations: 65% private

• Rural hospitalisations: 54% private

• Outpatient care:

  • Urban: 74% private

  • Rural: 67% private

• Implication: Heavy dependence on private providers

High Costs for Serious Illnesses

• Private care cost multiplier:

  • Cardiac cases: up to 6.8x higher

  • Respiratory cases: up to 5.2x higher

• Impact: Drives premium escalation and financial stress.

3. Key Systemic Issues

Incomplete and Denied Claims

• Claims paid (FY24): 71.31% (₹83,493 crore)

• Claims unpaid: 22.22% (₹26,037 crore)

  • Disallowed under policy terms: ₹15,100 crore

  • Repudiated: ₹10,937 crore

• Pending claims: ₹7,584 crore

• Takeaway: Highlights gaps in underwriting, clarity, and service.

Need for Better Oversight

• Current issues:

  • Wide variation in settlement rates across insurers

  • Lack of uniformity in practices

• Suggested reforms:

  • IRDAI-led review

  • Policy standardisation

  • Board-level monitoring for greater accountability

Provider Pricing Disparities

• Cost variation even within same hospital groups in different cities

• Outcome: Makes premium pricing unpredictable

• Need: Uniform national pricing norms for consistency

4. Reform Recommendations and Structural Changes

Promote Standard Policies

• Scale up Arogya Sanjeevani with uniform benefits and terms

• Aim: Reduce disputes and introduce pricing discipline

Establish a Healthcare Regulator

• National regulator needed to:

  • Ensure pricing transparency

  • Control medical inflation

  • Manage technological shifts in treatment and insurance

Strengthen Tier-2/3 Infrastructure

• Finance expansion via:

  • Health bonds from municipalities and hospitals

  • Bonds made eligible for insurer investment

GST Relief for Seniors

• Proposal: Zero-rate GST (currently 18%) on health insurance for senior citizens

• Goal: Improve affordability and uptake

Process and Outreach Reforms

• Insurers should:

  • Adopt digital tools

  • Improve claims efficiency

  • Strengthen fraud detection

  • Cut costs via direct sales, reducing intermediation

5. Public Sector Impact and Future Strategy

Welfare Gains from PMJAY

• Coverage: ₹5 lakh per family

• Outcome:

  • ₹1.25 lakh crore reduction in out-of-pocket expenses

  • 73.98 crore Ayushman Bharat accounts

  • 1.75 lakh wellness centres

• Evidence of broad inclusivity and welfare gains

Need for Integrated Reform

• While campaigns like that of the General Insurance Council help raise awareness,

• A fragmented approach is insufficient.

• Comprehensive reform is essential to realise systemic and long-term welfare gains.