- Deductibles, super top-ups, portability options can help manage costs.
Rising health insurance premiums continue to worry millions of policyholders, with many questioning why renewal costs keep climbing despite making no claims. Social media is increasingly filled with complaints from customers who say their premiums have risen by 20 to 30 per cent, while some have reported even steeper increases.
The confusion has only deepened since the removal of GST on health insurance in September last year. Many expected the tax relief to translate into lower renewal costs. Instead, premium hikes have continued, leaving policyholders wondering what is driving the increase.
The answer lies in how health insurance premiums are calculated. GST was only one part of the total premium. Insurers can revise premiums for an entire health insurance product when the overall cost of providing coverage increases. These revisions are generally applied across all policyholders under that product, regardless of whether an individual has made a claim.
Why Your Health Insurance Renewal Premium May Have Increased
One of the most common reasons for a higher premium is moving into a new age bracket. Most insurers calculate premiums using age bands, with different rates applying to different age groups. Crossing into the next band can lead to a noticeable increase in the renewal amount, even if every other aspect of the policy remains unchanged.
Another major factor is the steady rise in healthcare costs. Hospital room charges, diagnostic tests, medicines, doctors’ consultation fees, surgeries and other medical expenses have all become more expensive over time. As insurers pay larger claim amounts, these rising costs are reflected in the premiums charged to customers.
Health insurance also operates on a risk-pooling model. Premiums from policyholders are collected into a common pool, from which claims are paid. If the overall claims experience for a particular plan worsens, insurers may reprice the product for everyone enrolled in that plan. As a result, even policyholders who have never filed a claim may see their renewal premium increase.
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Should You Reduce Your Health Insurance Cover?
A higher renewal premium often prompts policyholders to reduce their sum insured. For instance, someone with a Rs 10 lakh policy may consider lowering the cover to Rs 5 lakh to reduce the annual premium.
While this approach may provide immediate savings, it also weakens financial protection at a time when medical inflation continues to rise. A cover amount that seemed sufficient a few years ago may no longer be enough to meet the cost of a serious hospitalisation.
Before making any changes, policyholders should first understand why the premium has increased and carefully assess all available options instead of reducing their protection without evaluating the long-term impact.
Understand The Reason Behind The Premium Hike
The first step is to request a detailed premium break-up from the insurer. This can help determine whether the increase is linked to an age-band change, product repricing, additional covers or any other factor. Many policyholders overlook this step, but knowing the exact reason can help identify whether there is any scope for review.
Policyholders who pay a higher premium because of a medical condition disclosed at the time of purchase may also consider requesting a review of the loading. If the condition is now well-controlled or has improved significantly, updated medical records can be shared with the insurer. Although there is no guarantee of a reduction, it is worth seeking a reassessment.
Another option is portability. Customers whose premiums have become difficult to manage can explore switching insurers, with waiting period credits generally carried forward subject to the new insurer’s approval. However, the premium should not be the only deciding factor. Coverage, exclusions, room rent limits and other policy features should be evaluated carefully before making a switch.
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Deductibles And Super Top-Ups Can Help Manage Costs
Choosing a deductible is another way to reduce premium costs. A deductible is the amount the policyholder agrees to pay before the insurer starts settling claims. For example, with a Rs 25,000 deductible on a Rs 2 lakh hospital bill, the policyholder pays the first Rs 25,000 while the insurer pays the remaining eligible amount.
Since the policyholder assumes part of the financial risk, insurers may offer a lower premium. A Rs 25,000 deductible on a Rs 10 lakh health insurance policy, for example, can reduce the premium by around 20 to 25 per cent. Policyholders should also understand whether the deductible applies annually or separately to every claim, as an annual aggregate deductible is generally more favourable.
For those planning over the long term, a super top-up policy can offer another way to balance coverage and affordability. Instead of purchasing a Rs 1 crore base policy, a policyholder may choose a Rs 10 lakh base cover along with a Rs 90 lakh super top-up. The base policy can cover smaller hospitalisation expenses, while the super top-up is designed to take over once expenses exceed Rs 10 lakh.
This strategy may also prove useful over time. As savings and investments grow, policyholders may eventually be able to meet the initial Rs 10 lakh from their own resources and continue with only the super top-up to cover major medical expenses.
