Port or combine base health plan with top-up to cut cost

Recharge, guaranteed NCB enhance cost-effectiveness of insurance policies

Health insurance premiums have, on average, risen 4.78 per cent year-onyear in the third quarter of 2022, according to Policyx.com’s health insurance price index.

The index, computed by factoring in price changes by five leading insurers (across age groups and sum insured) is an average figure. Many customers would have experienced much higher premium increases of 20-40 per cent over the past year.

Adverse claim experience

One key driver of premium hikes is insurers’ adverse claim experience. “Both the number and the average size of claims rose during the pandemic,” says Kapil Mehta, co-founder and chief executive officer (CEO), Securenow.

The pandemic, say experts, drove costs up within the healthcare ecosystem. “Market sources tell us that medical inflation, which used to be around 15 per cent, has risen even higher,” says Debashish Roy, headpoint of sale business, Anand Rathi Insurance Brokers.

Many insurers revise their premiums in a lumpy manner. “The average annual increase tends to be 5-8 per cent. But many insurers keep their premiums constant for, say, three years and then hike them by 20-25 per cent at one go,” says Naval Goel, founder and CEO, Policyx.com.

Sometimes, a large hike occurs due to faulty pricing initially. “Two to three years after launch, an insurer may realise that it had set the initial premiums too low,” says Goel.

Underwriting practices affect an insurer’s claim experience. “An insurer with lax underwriting standards could onboard too many customers in poor health condition and then have a more adverse claim experience. Such an insurer will be forced to undertake larger premium hikes,” says Mehta.

Avoid knee-jerk reaction

Assess the rise in premium over three years instead of one. “If it is 5-6 per cent annually and is in line with the increase by other insurers, you will have to accept it,” says Goel.

Also check if you have moved into a higher age band. When that happens, the jump in premium is substantial.

Consider porting

If, however, you conclude that the hike is unjustified, consider porting to another insurer whose premium is more reasonable. “Regulation allows you to move to another insurer’s plan without losing your waiting period benefits. However, begin the process of porting at least a month before your existing policy is up for renewal,” says Mehta. Before porting to an insurer, check when it last hiked its premiums.

“It shouldn’t happen that after you move to an insurer, it hikes its premium a year later,” says Goel.

Combine base plan with top-up

The sum insured must be enhanced in line with rising healthcare costs. Instead of increasing the sum insured on your base plan, consider buying a super topup plan. “If you live in a metro, go for a base plan of ~10 lakh and a super top up of ~10 lakh (or more, depending on affordability). The total premium of the combo will be lower than that of a ~20 lakh base plan,” says Goel.

Cost-effective features

Features like recharge and guaranteed no claim bonus (NCB) can make your plan more cost-effective. “If you have the recharge feature and your sum insured gets exhausted, the insurer refills it with the same amount. Guaranteed NCB means your sum insured keeps on increasing annually even if you make a claim,” says Roy.

Many policies offer wellness benefits. By walking a certain number of steps during a year, you can earn a discount at the time of renewal. Nowadays, you can pay the premium for three years at one go. Even if the insurer hikes the premium during those years, you are shielded. Cost-conscious customers may also opt for Arogya Sanjeevani, the standard indemnity cover mandated by the regulator. “While it comes with sublimits, the premium is relatively lower,” says Roy.

Finally, at the time of purchasing a policy, compare premiums not just for your own age but across age bands. “Some insurers keep the premium rates lower at a younger age but hike it steeply for older age groups. Others hike premiums more smoothly across age bands,” says Mehta. Opt for the latter.