Insurance premiums in India have seen a significant rise of 25-30% over the past three years, affecting both new and existing policies. Despite growing awareness of the importance of insurance post-COVID-19, the increased costs have deterred some consumers from purchasing new policies or renewing their current ones. Major insurers across the industry have implemented hikes, further adding to the financial burden on consumers.
The surge in premiums is largely driven by India’s high medical inflation rate, currently the highest in Asia at 14%. This increase in healthcare costs directly impacts insurance premiums, as insurers adjust their rates to cover the rising expenses. Additionally, the frequency of insurance claims has escalated due to an increase in chronic diseases and the aging population, leading to higher claim payouts and, consequently, higher premiums.
Seasonal illnesses like dengue and malaria have also contributed to the rising premiums, with treatment costs for these conditions increasing significantly. Operational costs and the adoption of technology-driven solutions, or insuretech, have further influenced premium rates. While these technological advancements are expected to reduce operational expenses, their impact on premiums remains to be seen.
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In response to the Insurance Regulatory and Development Authority of India’s (IRDAI) call for more affordable insurance products as part of its ‘Insurance for All’ vision by 2047, insurers are making efforts to improve their underwriting processes and risk management strategies. The gradual shift towards insuretech could eventually lead to lower premiums, benefiting consumers in the long run.