Health segment leads decline in premium income growth of Indian insurers in FY25: Here’s why

The premium income on government health insurance schemes declined by 12.17 per cent to Rs 9,234 crore, according to GI Council data.

The growth in the insurance sector has slowed down with inflation and stagnant incomes forcing consumers to prioritise essential expenses. As a result, many individuals and businesses are cutting back on discretionary spending, including health insurance premiums. Industry experts warn that high premiums and perceived low immediate need are driving a significant portion of the population to delay or avoid purchasing insurance, especially health insurance, altogether. This trend slowed down the growth in the sector, as insurers struggled to attract new policyholders.

A major reason for the growth slowing down is the sharp rise in the health insurance premium, triggered by medical inflation and high claim status.

The IRDAI recently directed insurers that they should not revise the premium on health cover products for senior citizens by more than 10 per cent in a year. The regulator’s move follows a sharp hike in health premium by over 50-60 per cent by insurers in the case of senior citizens with some insurers even resorting to 100 per cent hike in premium.

Why consumers are slashing health insurance purchases

“The health segment is witnessing high costs. Insurers are becoming choosy… they are targeting young people who are paying lower premium. But it’s a profitable portfolio,” said an insurance sector official. The alarming jump in hospitalisation expenses indicates the surge in healthcare costs and medical inflation in the country.

Medical inflation is on the rise and current inflation is around 14 per cent which further fuels the hike in the premium.

“I would like the premiums to be capped but the same cannot be done unless the hospitals are regulated,” said an insurance sector official.

“The rise in health insurance premiums can be attributed to several factors. According to the industry data, the average cost of healthcare services has increased by 15 per cent over the past year, driven by advancements in medical technology and rising labour costs. Additionally, the growing prevalence of lifestyle diseases, such as diabetes and hypertension, has resulted in a higher number of claims,” said Rakesh Jain, CEO, Reliance General Insurance. In fact, industry claims data shows that lifestyle-related diseases account for over 30 per cent of all health insurance claims, he said.

The health insurance sector experienced robust growth during and immediately after the COVID-19 pandemic, driven by heightened awareness and increased policy purchases. “However, as the pandemic’s impact subsided, the surge in demand has gradually normalized, leading to a tapering effect on growth. The implementation of a revised premium recognition methodology has impacted the segment’s growth,” Jain said.

Meanwhile, the growth in gross premium income in the motor insurance segment fell to 7.94 per cent (Rs 99,065 crore) in FY25 from 12.92 per cent (Rs 91,780 crore) last year. Of this, Rs 58,711 crore is accounted for by third party motor premium.

According to GI Council data, crop insurance premium declined by 1.98 per cent to Rs 30,095 crore during FY25. Fire insurance premium income also declined by 5.3 per cent to Rs 24,286 crore.