Irdai Seeks To Put A Lid On Soaring Health Insurance Premiums

The Insurance Regulatory and Development Authority of India (Irdai) is examining whether annual health insurance premium hikes should be capped, not just for individual products but across insurers’ entire portfolios, according to a recent report by CNBC.

The idea is to link surges in premium with the rising costs of medical treatment, a move aimed at keeping cover affordable for policyholders while giving insurers room to operate sustainably.

Why The Regulator Is Stepping In

For years, many health policies have been launched at attractive prices only to become far costlier over time, leaving customers with little choice but to pay up. Younger policyholders, in particular, have shouldered the weight of these hikes, since insurers are barred from raising premiums for senior citizens beyond 10 per cent per year.

Health insurance has grown into a cornerstone of the industry—expected to contribute around 40 per cent of general insurers’ premium income in FY25. With hospitalisation costs spiralling following the onset of the Covid-19pandemic, the regulator believes the time is ripe for tighter oversight.

Senior Citizen Relief, New Worries Elsewhere

Earlier this year, Irdai introduced a 10 per cent annual cap on premium hikes for senior citizens. The step was widely welcomed, as older customers had seen their premiums shoot up sharply in recent years. But it has also sparked concern that insurers may simply offset the loss by raising prices for other age groups.

Observers also point out that insurers have yet to do enough to streamline costs or improve efficiency. Without such measures, they argue, the higher cost of care will inevitably continue to flow through to policyholders.

How Dependent Insurers Are On Health Cover

The share of health premiums in insurers’ overall business varies considerably. ICICI Lombard draws about 30 per cent of its income from health products, while for New India Assurance the figure is closer to 50 per cent. Go Digit’s exposure is smaller at around 14 per cent.

Even so, the broader direction is unmistakable: health insurance is becoming increasingly central to insurers’ growth strategies.

Consultation Paper In The Works

The regulator is now preparing a consultation paper that will spell out its thinking on premium caps. The draft will be opened up for feedback from insurers, policyholders, and health experts before any final decision is taken.

The way the framework shapes up will have far-reaching implications—not just for consumers, but for the way insurers price and manage one of their most important product lines.