- Date : 23/04/2021
- Read: 3 mins
Do you know why health insurance premium increase each year? Let's deep dive into each of these causes and see what you can do about it
If you have purchased a medical insurance policy, you might have noticed that your premium amount increases every year. This is due to a number of factors, which we shall examine in detail.
1. Healthcare inflation
The cost of healthcare is rising constantly, and it is increasing at the rate of 12%-18% annually. Insurance companies have to compensate for increased claim amounts from their clients, and this leads to increased premiums for the same coverage year on year.
2. Claim history
Some insurance policies have a clause that specifies that the premium can increase if you make claims. This will be in the terms and conditions of the policy – the fine print. Go through your policy wordings carefully to find out if your insurance premium is one such. If it is and you wish to change, you can port your policy. But be aware that you can do this only during renewal. ‘Porting’ is the carrying over of benefits (say, the waiting period for pre-existing conditions) to a new policy.
3. Policyholder’s age
Increasing age means increased risk of disease and therefore higher odds of needing to make a claim, so insurance companies proportionately increase the premium for older people. If you have a parent near or above the age of 60, what you can do is subscribe to a family floater policy to reduce the overall cost of medical insurance for the family. A floater policy will almost always offer a greater overall sum insured for a lower premium than individual policies for each family member.
4. Health status
Insurance companies reward healthy clients that don’t make a claim by offering them a bonus sum insured over the original sum insured for every year that a claim isn’t made. This is sort of like car insurance that offers a discount on renewal if a claim isn’t made, except that the premium amount is not reduced; the sum insured is increased instead.
5. Change in coverage benefits
If you decide to subscribe to certain add-ons at the time of renewal, it will drive up the premium amount. For example, if there is history of heart disease in your family, you might want to subscribe to an add-on that offers special coverage for heart-related ailments. The add-on means increased coverage, so your premium will increase.
As a corollary to the previous point, IRDAI has made insurance companies offer a wider coverage under medical insurance. Non-standard treatments are now included in the coverage provided by insurance, and ailments like mental illnesses are now covered as well. Please check your policy document to know exactly what treatments are covered.
Another factor is the coverage provided for COVID and COVID-related complications. The pandemic has had an unprecedented effect on the healthcare system, and this has led to a sharp increase in claims, either directly or via complications due to the effects of the viral infection on the patient.
To sum up, you should not be surprised by increased medical insurance premiums, because with inflation alone you can expect the premiums to increase. The increased costs associated with healthcare only drive the premiums further up. Learn everything about insurance cover for COVID-19 in India.