Irdai Puts Cap On Health Premiums For Seniors: Here's All You Need To Know

The Insurance Regulatory and Development Authority of India (Irdai) recently put a cap on the unregulated premium hikes of health insurance policies for senior citizens. The mandate, officially announced on January 30, 2025, sought a revision in premium rates under health insurance policies for senior citizens by capping it at 10 per cent per year.

This decision has been a welcome relief for many policyholders many of whom live on fixed incomes and have to manage their finances carefully.

Says Shilpa Arora, co-founder and COO of Insurance Samadhan, “We have seen a rise of 30-40 per cent in premiums of senior citizens. This capping will offer some protection to this vulnerable group who needs the protection most.”

A Challenge For Insurers?

However, this change is being seen as a challenge to insurers. While this cap intends to safeguard policyholders, it requires an act of ‘balancing’ on the part of insurers. They need to ensure affordability for customers while also navigating their own financial viability. The concern is that some insurers might reconsider offering policies for senior citizens, potentially limiting choices in the market.

Says Arora, “I am concerned about the senior citizens who will buy fresh policies, they may face such challenges. This will be beneficial for the policyholders who have continued cover where now the insurer cannot change or discontinue the product.”

To make sure this rule is implemented, insurers will have to rethink their approach. This could mean negotiating better rates with hospitals, promoting preventive healthcare measures, and improving cost efficiency when it comes to their own operations.

The 10 per cent cap by Irdai will rein in the issue of large, sudden price jumps by insurance companies, instead, they will have to make gradual adjustments which could result in a more sustainable and predictable pricing model.

Let’s review in detail what exactly Irdai has mandated and what would be its implication on the elderly policyholders;

In its release, Irdai noted that the premium rate is primarily based on the estimated claims outgo and the expenses including acquisition costs incurred by the insurance company for acquiring and servicing the insurance policies. The claims outgo are largely dependent on the amounts charged by the hospitals for various treatments/ surgeries.

It further noted that, unlike in the case of the Pradhan Mantri Jan Arogya Yojana (PMJAY) scheme where the hospitalisation expenses are negotiated centrally for package rates and are thus standardised across various hospitals, there is no such standardisation in the case of health insurance products.

This is leading to higher hospitalisation costs resulting in higher claims outgo under health insurance products offered by insurers.

Therefore, Irdai has ordered that insurers need to undertake prior consultation with the regulator;

• If they propose to increase the premium for senior citizens by more than 10 per cent per annum.

• And if they are withdrawing any individual health insurance products offered to elderly policyholders

In addition to this, the insurers also need to take necessary steps for the common empanelment of hospitals and negotiate package rates along the lines of the PMJAY scheme.

Since the release of this circular, several media reports have noted that insurers are currently seeking clarity from Irdai to understand how it would apply to long-term policies and whether rates can be adjusted upon policy renewal. The full implementation of this regulation is yet to be seen in the market.