Health insurance affordability remains a challenge in 2025: Policybazaar CEO

Bengaluru: As India chugs towards its goal of ‘insurance for all by 2047’, the Insurance Regulatory and Development Authority of India (IRDAI) is labouring on with reforms and nudging insurers to diversify their products while also making them more affordable. Yet, insurance penetration remains a challenge, government schemes notwithstanding.

Again, one of the more vibrant verticals of the industry - health insurance - has been hit by inflation in the post-Covid scenario and it will be a while before it can emerge as more affordable, says Sarbvir Singh, joint group CEO of PB Fintech Ltd, that has in its fold - Policybazaar.com and Paisabazaar.com - in a conversation with DH’s Anushree Pratap.

Which insurance segment is growing more than others?

Both life insurance and health insurance are growing in the 15-20% range depending on the month. For health, the reported numbers in the last three months look worse than they actually are, because there has been a rule change for multi-year policies where now only the first year of the premium is counted.

In life insurance, there has been some slowdown in the third quarter because the market cooled off and the growth in the first half was driven by unit linked insurance plans (ULIPs). And the surrender value changed from October, so probably some demand was pulled forward as the system adjusts to new rules.

The general insurance business is growing slower. Motor is closer to 8-10 per cent, with pricing pressure and muted new car sales. The commercial lines have been weak, especially fire, where pricing has been a challenge.

Has inflation put pressure on the industry? Is the pressure expected to continue?

In 2024, affordability in health insurance was one of the biggest challenges. While overall inflation may be in the low to mid single digits, health inflation is actually upwards of 10%. The regulator had restricted price rises during Covid, but in 2023 and 2024, prices have gone up.

With health inflation running so high, low prices are not possible for companies as well. That is why a lot more people are buying monthly now. At Policybazaar, almost one third of our sales are now where people are buying monthly.

My sense is that health inflation will always be a little higher than general inflation. But I think it will come down from these levels because a lot of capacity is being added in terms of hospitals. If you look globally, this is a concern everywhere.

Do you think penetration and affordability will improve going forward?

Penetration has been hard. I think the number has been stuck around 5.2-5.4 crore people with retail health insurance. Overall health insurance, including corporate and government, is more, in the order of 35-40 crores. Penetration is inching up and will continue to go further because health insurance is becoming a necessity. The challenge is to make sure it remains affordable.

Policybazaar is tackling network and room restrictions to make the product more affordable. We are also working on a set of features around co-pay and deductibles. The product construct should be that the customer pays the first X thousand rupees, but anything above that, you must pay.

The hospital is part of the mix by saying that you have to manage your costs. The insurance company is there to bear the risk. This is the only way the system can be sustainable, if all three are part of the contract.

What are your expectations from the upcoming Budget?

Under the new tax regime, deductions have become less relevant because fewer people are opting for the older regime. The good news is that it has shown that the Indian consumer was not just buying insurance because of the tax regime. Having said that, we have always said that there should be some sort of tax benefit given to people who buy insurance.

With GST being a separate matter, there has been public discussion around reducing or eliminating GST on health and term insurance - which the GST Council is looking into. That would be very welcome.

Often under government schemes, many people benefit but remain individually under-insured. What is the recourse then?

First, buying insurance is a positive thing, even if you are underinsured. On the life insurance side, 27-28 crore Indians have bought life insurance. So, life insurance in India is not that under-penetrated a category. The problem is what kind of life insurance and how much sum assured you have.

That is a challenge because term insurance penetration is ridiculously low; only 60-70 lakh Indians have term insurance. You need to improve awareness of the right kinds of products, which is incumbent upon the industry.

If you are a low-income person, the recourse is largely to hope that the government scheme improves. The middle-income customers are where the biggest challenge is. That is where both the private and government sector have a role to play.

Is insurance fraud still a big challenge in the industry? What are other challenges?

Fraud and abuse is a big challenge in the industry globally. Fraud happens at the claim level, so there is always a multiplier between the premium and the claim. Even if fraud may appear as a small percentage of the premium or the number of cases may be small, actually as a percentage of the claims it can be very large.

The bigger challenge is to bring more people into the fold. As per insurance finance, a large number of people pay a small amount of money to help those few people for whom something happens. In health insurance, one fundamental challenge is that older people will always have higher claims than younger people. So to be able to keep health insurance affordable for everybody, there needs to be a steady influx of younger people.

What is Policybazaar’s growth plan for the year?

Our core business profit has increased by Rs 150-200 crore per year. The last three to four quarters have been really good. If that continues, hitting our stated goal of Rs 1,000 crore profit by financial year 2026-27 looks very feasible.