Health insurance plans have become necessary in these uncertain times. As the epidemic is becoming more and more hospitalized, people are suffering financial losses. Also, there is no vision for the epidemic, with demand for health insurance increasing in 2020. Despite increased demand, health insurance premiums have seen a substantial increase in 2020 as compared to 2019. Many policyholders have found that their premiums have increased by 30% on renewal to 40% and, in some cases, premium increases have also touched 100%. What are the possible reasons to blame for the increase in health insurance premiums? let’s explore –
- Increased claims due to COVID Health insurance companies are registering higher claim amounts due to the epidemic. As of 30 October 2020, insurance companies have filed a total claim bill of INR 7700 crore under their COVID health insurance policies as per data compiled by the General Insurance Council (GIC). The epidemic has increased the demand for health insurance policies by 15.8% by October 2020. (Source: Indian Express) Due to high claim amounts, health insurers are forced to increase their premium rates to ensure benefits and solvency.
- High medical inflation The inflation of medicine is increasing year by year as the cost of medicine and treatment is increasing. According to the Economic Survey 2019, in the financial year 2017-18, the health inflation rate was 4.39% which increased to 7.14% in 2018-19. Compared to these two financial years, inflation in hospital and nursing fees rose to 9.4% in 2018-19 as compared to 6.5% in 2017-18.
(Source: India today)
This rising inflation has caused health insurance companies to witness large amounts of claims, leading to an increase in premium rates.
- comprehensive coverage IRDAI (Insurance Regulatory and Development Authority of India) has issued orders to expand coverage for health insurance companies. Sickness and treatment such as mental disorders, modern treatments, treatment related to COVID, etc. are now a common coverage benefit in health insurance plans. As the scope of policies has increased, insurers are made aware of the possibility of higher claims. Thus, to compensate for the extensive coverage offered, insurers have increased their premiums.
- Increased risk of COVID for people with co-morbidity Knowing that people with diabetes, hypertension, or other co-morbidities are exposed to a complication related to COVID, insurers face greater risks. This is why premium increases have been focused more on people with co-morbidities or for those who smoke because they face higher health risks against COVID.
- The concept of level premium in the age group Many insurance companies charge the same premium from individuals in a particular age group. This age group is usually for a period of 5 years, i.e. 25 to 30 years, 31 to 35 years, etc., if you are in one age group, your premium cannot change unless you are in the same bracket Will remain However, insurers may have to adjust their premiums based on their claim experience and their adjustment usually occurs when the age limit changes. Therefore, when you move to the next age limit, the premium changes may be higher for the claimant’s experience of the insurer.
While COVID has certainly affected the premium rates of health insurance companies, the above factors also have an impact on the tremendous increase in premium rates. So, the next time you renew your health insurance plan and get an unusually high amount of premium, know the reasons why the company is asking for a higher premium amount.