The demand for health insurance in India remained strong in FY22, with an overall growth of 25%, despite high medical inflation, according to the Indian Health Insurance report by Motilal Oswal Financial Services Limited (MOFSL).
Among Asian countries in 2021, India had seen the highest medical inflation rate of 14%, followed by China (12%), Indonesia (10%), Vietnam (10%), and the Philippines (9%).
While new customers have been impacted by higher prices, existing customers have seen a double-whammy of age related increases as well as price hikes, said the MOFSL report. The key factors driving the price hikes are medical inflation, adverse underwriting experience, and higher demand from smaller corporates as employers realize the need to offer protection to employees, the report said.
The solid demand recorded in FY22 was on top of a strong base in FY21, where the growth in premium stood at 13%. The impact of the second and third Covid waves led to a significant jump in claim ratios in FY22, while the severity of non-Covid claims has been higher in FY22. Moreover, the Covid-related claims accounted for 6% of the total number of health claims paid out in FY21, and it is expected to constitute 11-12% of the total health claims paid out in FY22, according to ICRA.
From the aspect of retail health insurance, schemes across age categories witnessed a price hike in FY22. There have been further price hikes of ~2% on an average to ₹25,649 in 1QCY22. From the aspect of group health insurance, premium price hikes have been seen between 5% and 40%, with a median increase of 10%. Elevated loss ratios along with medical inflation have driven insurance companies to raise prices of both retail and group health plans.
Meanwhile, the report noted that the growth in retail health insurance trajectory will continue, pricing is likely to remain stable, except in case of any further Covid waves.
With only 3.5% of the population covered under retail health insurance plans, the retail health segment in India remains highly underpenetrated. The past two years have established the need for buying a health insurance policy among individuals as well as for increasing the sum assured.
However, the industry saw a sharp surge in claims during the first Covid wave, owing to the higher severity of claims. Although the severity of claims reduced by ~24% during the second Covid wave, the increased frequency of claims offset this benefit. The impact of the third Covid wave remained limited, with a lower number of hospitalized cases compared to the second Covid wave, but higher non-Covid claims continued to hit the industry, the report said.
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