Invest Smart: Strategies for consumers to bring down premiums amid rising insurance costs

Insurance costs in India are rising due to several factors affecting life, health, and vehicle insurance premiums. These increases reflect broader trends in the insurance industry as it adjusts to higher risk levels and seeks financial stability amidst changing economic conditions.

In the latest episode of Invest Smart, BajajCapital Insurance Broking CEO Venkatesh Naidu offers valuable insights into the factors driving these increases and strategies to mitigate their impact.

In the latest episode of Invest Smart, BajajCapital Insurance Broking CEO Venkatesh Naidu provides valuable insights into the factors driving these increases and what strategies can be used to reduce premium costs.

Why are insurance premiums rising?

Venkatesh identifies three main reasons for the spike in insurance premiums over the past few years. The COVID-19 pandemic led to an increase in claims and higher costs for insurers, which resulted in premiums going up. Additionally, India has seen one of the highest rates of medical inflation globally, second only to China. Another reason is the unregulated nature of the market since there is no framework to control the costs of hospital services.

Health Insurance vs. Term Insurance

While health insurance premiums have surged by 15-18% annually over the last three years, term insurance premiums have also risen, however, they still remain the cheapest globally. This increase in term insurance premiums is due to reinsurers reassessing risks post-pandemic and charging higher premiums for Indian insurers.

Regulatory changes and their impact

Recent regulatory changes, such as reducing the moratorium period and waiting periods for pre-existing conditions, could marginally increase premiums in the future. However, these changes aim to provide more immediate coverage for policyholders, which could lead to a higher incidence of claims.

Consumer strategies to mitigate rising costs

To reduce the impact of rising premiums, Venkatesh suggests utilizing wellness benefits offered by insurers. Many insurers now provide discounts for maintaining good health, such as offering gym memberships or incentives for achieving daily step counts. Additionally, consumers can save by paying premiums for multiple years upfront, potentially receiving a discount of up to 15%.

When considering health insurance policies, Venkatesh advises paying attention to key factors such as premiums, coverage, waiting periods, copayments, deductibles, and room rent limits. Opting for policies with zero copay, zero deductible, and no waiting periods, while more expensive, can offer comprehensive coverage.

As the industry awaits the upcoming budget, Venkatesh further added that the potential reduction in GST on health insurance premiums from 18% to 5% is a hopeful prospect. This change, along with the implementation of the proposed health stack, could significantly benefit consumers by lowering premium costs and improving the efficiency of health data management.

Also watch: Invest Smart | New health insurance rules will benefit policyholders but premium costs will rise