Hinterland India Now Drives Health Insurance Growth

• Tier-2 and Tier-3 cities now drive nearly 60 per cent of health-insurance purchases.

• Non-metro buyers increasingly prefer Rs 10–15 lakh covers with essential add-ons.

• EMI-based premiums expand access, crossing 40 per cent adoption in smaller towns.

• Rising renewals show health insurance becoming core family financial planning.

A quiet but significant shift is taking place in India’s health insurance market. The momentum, which for years came from the metros, is now coming from outside them. Smaller cities and towns are writing most of the new policies today, a little under six in ten, in fact, marking a change that few would have predicted a decade ago, according to a recent study by Policybazaar.

Higher Covers And Tailored Plans Take Centre Stage

What stands out in these regions is not just the rising volume but the changing nature of what people are buying. A few years ago, a Rs 3–5 lakh cover was the standard choice in non-metro India. That trend has faded quickly. Buyers are now opting for Rs 10–15 lakh plans, and in many families, this shift has become almost automatic as they acknowledge how sharply medical costs have risen.

People are also paying more attention to the fine print. Add-ons, like room-rent flexibility, outpatient department (OPD) coverage, consumables protection, and cumulative bonus, are no longer niche features. They’re being picked up widely, suggesting that consumers are reading more, comparing more, and choosing plans that actually match their risk and household requirements. Modular plans, which combine several benefits under one umbrella, have turned into the default option in many parts of the hinterland.

EMIs Widen Access As Families Prioritise Health Cover

Another factor driving this surge is the spread of EMI-based premium payments. This one change has made health insurance less intimidating for many first-time buyers. In several Tier-2 and Tier-3 pockets, equated monthly instalments (EMI) usage has crossed the 40 per cent mark. Young salaried earners, small-business owners, and even new parents are finding monthly payments far easier to commit to than a single annual outlay.

Family floater policies remain a favourite in smaller towns, and the reasons are straightforward: joint families, multi-generational households, and the need to combine coverage under one plan. Interestingly, renewals have also been climbing, something the industry has struggled with in the past. It suggests that households are beginning to see insurance as part of their regular financial planning rather than a discretionary expense.

Hospitalisation continues to dominate claim patterns, which is not surprising given the costs attached to even short stays in private hospitals. It also reinforces why higher coverage amounts have become more common across these regions.

All of these point to a market that is evolving quickly. The belief that metros drive awareness and adoption no longer holds. The real story now lies in India’s hinterland, where families are choosing stronger cover, engaging more seriously with policy details, and building a more stable relationship with long-term financial protection.