The impossible trinity, or trilemma, holds that a country cannot simultaneously maintain a fixed exchange rate, free capital movement, and an independent monetary policy; policymakers must prioritise two at the expense of the third.
A strikingly similar trilemma sits at the heart of health insurance: the insurer’s duty to settle claims sustainably, the hospital’s duty to deliver effective, patient-centred care while earning a fair return, and the customer’s demand for affordability. Like the economic trilemma, this cannot be resolved by decree. All stakeholders must recognise that a functioning healthcare ecosystem is a shared asset, and that each has a clearly defined role in preserving it.
Understanding the trilemma
Insurer’s sustainability challenge: Paying claims efficiently, delivering robust customer service, and detecting fraud are foundational to what insurance promises, and none come without cost. They require sustained investment in technology, skilled manpower, and advanced analytics. Expecting high settlement ratios and best-in-class service while indefinitely compressing premiums is not realistic, and ultimately undermines the very affordability customers seek.
Hospital’s dilemma: Medical inflation in India has consistently outpaced general inflation, driven by higher input costs, technology-intensive procedures, and longer stays. Hospitals carry significant capital requirements and must remain financially viable to function effectively and invest in the quality of care they provide.
Customer’s paradox: Middle-class India has limited headroom for health insurance spend, but the sheer scale of numbers can sustain the system even at lower price points. Affordability is non-negotiable, but accessing top-tier facilities and advanced procedures comes at a cost; as in every industry, pricing reflects cost structures, and healthcare is no exception.
Making the Trilemma Work
Stability will not come from unilateral action or finger-pointing. Each stakeholder has a defined role, and the system only works when all cooperate.
Insurers must build curated networks of hospitals that meet quality and ethics benchmarks, and then genuinely back them. When a patient is under the care of a trusted network hospital, clinical judgment must be respected. Second-guessing doctors, delaying approvals, or using friction as a cost-containment tool corrodes the system. Fraud checks must remain, but never at the cost of a legitimate claimant’s care. The insurer’s role is to facilitate care, not obstruct it.
Hospitals must follow standardised treatment protocols, avoid unnecessary investigations, and ensure every procedure is medically justified, not financially motivated. Inflated billing, even when episodic, raises premiums for every policyholder and erodes systemic trust. Hospitals that operate with transparency and restraint are not simply being virtuous; they are protecting their own long-term viability within the ecosystem.
Customers should have skin in the game, either by triaging non-emergency conditions through a neutral general physician or primary care network, or by opting for a co-pay or deductible. Either approach shifts behaviour in the same direction: more active engagement, sharper scrutiny of care received, and a leaner premium pool for everyone. Customers must also disclose their health conditions fully at the point of purchase; accurate disclosure is the foundation of fair risk pricing, and without it, the entire premium pool is distorted.
The distributor is a critical participant in this ecosystem, and arguably the most consequential at the point of entry. It is the distributor who shapes what a customer understands about their policy, what they declare, and how they engage with the system from day one. A responsible distributor guides customers through disclosure with care and integrity, not around it for the sake of a sale, and steers them toward appropriate cover and realistic expectations. When distributors play this role well, the entire ecosystem benefits. When they do not, the costs ripple outward to every other stakeholder.
The Way Forward
Game theory offers a useful lens. In the Prisoner’s Dilemma, players acting in pure self-interest arrive at an outcome worse for everyone. The healthcare ecosystem faces exactly this temptation: the insurer tightens approvals to protect margins, the hospital inflates bills to cover costs, the customer over-claims to extract maximum value, and the distributor optimises for commission over fit. Each move seems rational in isolation. Together, they are collectively ruinous.
When the game is played repeatedly, however, cooperation becomes the dominant strategy. The insurer that trusts good hospitals retains them. The hospital that bills responsibly earns faster approvals.
The customer who engages honestly pays lower premiums. The distributor who advises well builds lasting relationships. The only stable equilibrium is a cooperative one, and it is in the clear, long-term interest of all to work together.
Sarbvir Singh is joint group CEO of PB Fintech. Views are personal.