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Most of you know that a car insurance policy has been mandatory by the Motor Vehicles Act, 1988. But, do you know about the benefits and features of such plans?
Rising Health Insurance Costs Drive Policyholders to Cut Coverage or Skip Renewals
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The cost of health insurance has continued to rise, forcing many policyholders to either opt for a cheaper policy or terminate the entire policy. In the latest industry statistics, it was found that 10 percent of the policyholders did not renew their health insurance this financial year due to high premium rates.
Factors Driving Health Insurance Premium Increases
The following are the main causes of the increasing costs of health insurance:
- Medical Inflation: This has been increasing at about 14% per annum and has greatly influenced premium changes.
- Age-Based Premium Adjustments: Premiums increase periodically rather than steadily, typically every three years, with sharper hikes for older policyholders due to higher claims frequency.
- Claims Ratio Deterioration: Insurers are facing a decline in the claims ratio, the ratio of total claims paid to total premiums earned, and this has led to an increase in the prices.
- Technological advancement and Coverage Expansion: The advancement in medical technology and the expansion of the coverage of health insurance has also been a factor that has led to increased costs.
Extent of Premium Hikes and Policyholder Responses
As per recent data, 10% of the policyholders were subjected to an increase of 30% or more in their premiums, but only half of them dropped their policies or failed to pay the full amount of the increased premium.
Looking at long-term trends:
- 52% of policyholders experienced an annual increase of 5-10% in premiums, which means a policy that cost ₹ 100 a decade ago costs between ₹ 162 and ₹ 259 now.
- 38% of policyholders reported an annual increase of 10-15% and the premium rose to between ₹259 and ₹404 during the same period.
- 3% of the policyholders were subjected to annual premium increases of between 15% and 30%, which significantly increased costs.
However, the renewal rate is still healthy at 90% up by 10% from the previous year as per Amit Chhabra, Chief Business Officer – General Insurance at Policybazaar.
How Policyholders Are Managing Rising Costs
To deal with the increase in premiums, the following measures are being taken by the policyholders:
- Lowering the Premiums – Choosing to take up policies with lower benefits or coverage.
- Selecting Higher Deductibles – Choosing plans where they pay more of the costs before the insurance coverage begins.
- Comparing and Porting Policies – Switching to insurers with better cost-benefit ratios.
Author Bio
Paybima Team
Paybima is an Indian insurance aggregator on a mission to make insurance simple for people. Paybima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. Paybima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.
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