Good News For Senior Citizens Before Budget! Irdai Caps Premium Hike! What It Means For Policyholders

Health Insurance premiums have long since been a sore in the back of the elderly. With ever-rising medical inflation and escalating healthcare costs, senior citizens have increasingly found it hard to maintain their coverage due to steep hikes in insurance premiums that move from extremely high to ‘unaffordable’.

The numbers tell this story better. Over two out of three policyholders have seen their insurance premiums increase by 50 to 200 per cent over the past three years, shows a survey by Localcircles. Such a steep rise in renewal premiums leaves many struggling to afford their policies, forcing some to either downgrade their plans or drop coverage entirely.

To address this problem, the Insurance Regulatory and Development Authority of India (Irdai) has stepped up with a significant regulatory change that holds the potential to bring some relief to senior citizens.

In a circular dated 30 January 2025, the insurance regulator has capped the annual premium hike for senior citizens at 10 per cent, bringing much-needed relief to those aged 60 and above. The change aims to strike a balance between affordability for policyholders and sustainability for insurers. This would also ensure that older individuals are not priced out of essential healthcare coverage.

Why Was This Reform Needed?

Premiums (for health insurance) are majorly determined depending on an insurer’s claims outgo which is further influenced by hospital costs, medical inflation, and administrative fees of the insurance provider.

For individual insurance, the premium is determined based on factors such as age and pre-existing conditions, with no room for negotiation. This premium remains fixed for three years due to regulatory policies.

In contrast to government-backed schemes like Pradhan Mantri Jan Arogya Yojana (PMJAY) where hospitalisation costs are standardised, private health insurance policies operate in a largely unregulated pricing environment.

Several factors contribute to rising premiums:

1. Claims vs. Premiums: When claims exceed the premiums, insurance companies need to increase premiums to survive.

2. Increased Coverage: More people getting insured leads to a higher number of claims, pushing up the claim ratio and requiring adjustments in pricing.

3. Medical Inflation: The rising cost of medical treatments each year also contributes to higher premiums.

All the factors combine above lead to unpredictable and often excessive hikes in health premiums. The majority of this burden is borne by senior citizens who face the highest premiums as insurers view that their chances of claiming insurance increase because of their age and medical conditions.

The recent Irdai monitoring found that some insurers were significantly increasing premiums for older policyholders, sometimes in double-digit percentages, making coverage unaffordable for many. This regulatory cap is designed to ensure that senior citizens do not face abrupt financial burdens when renewing their policies.

Industry Experts Weigh-in

Shilpa Arora, COO and Co-founder of Insurance Samadhan, welcomes the move. She says, "It’s a welcome move since we have seen a rise of 30-40 per cent in premiums for senior citizens. This capping will offer some protection to this vulnerable group who needs the protection most."

However, she also raises concerns about the availability of comprehensive plans for new policyholders. “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 a continued cover where now the insurer cannot change or discontinue the product,” she states.

Would this cap lead to an increase in co-payments, deductibles, or other hidden cost adjustments due to this regulation?

Arora states, “Co-payment and deductibles are opted at the start of the policy and cannot be imposed on continued coverage.”

Is there anything for senior citizens to do, to ensure they maximise their health insurance benefits within this new framework?

According to Arora, the elderly policyholders;

• Should carefully compare the benefits of the policy when purchasing a new one to check for any exclusions or waiting periods.

• Can opt for co-payment and deductibles which can help reduce the premium if they are willing to take on some initial risk from their savings.

In addition to capping the premium hikes for senior citizens, Irdai has issued several other crucial orders in its circular.

Here are key takeaways for Senior Citizens;

1. Mandatory Regulatory Oversight: If insurers want to increase premiums beyond 10 per cent or withdraw a policy, they must consult Irdai first.

2. Better Grievance Redressal: To mitigate the claims issue faced by the elderly, Irdai has asked insurers to set up separate channels that will handle claims and complaints from senior citizens.

   Says Hanut Mehta- CEO and Co-Founder of Bimapay Finsure (A Division of Hindon Mercantile), “The requirement for insurers to establish a dedicated grievance redressal mechanism for senior citizens will significantly improve service quality and customer satisfaction. Companies that streamline support systems and enhance responsiveness are likely to gain stronger consumer trust and reinforce their market reputation.”

3. Hospital Costs must be ‘Negotiated’: The insurance regulator has asked insurance providers to standardise hospital rates on the lines of PMJAY to prevent overcharging and excessive claims outgo.

   Adds Mehta, “By following a model similar to the PMJAY, the industry can mitigate inconsistencies in hospitalization costs, leading to better financial management for insurers and making healthcare services more affordable and accessible to policyholders. Additionally, this strategy fosters closer collaboration between insurers and healthcare providers to ensure fair and efficient service delivery.”

4. Transparency Is Must: Lastly, Irdai has asked insurers to widely circulate and publicise these new regulatory reforms ensuring that seniors are aware of the changes that protect their insurance rights.

The recent Irdai mandate shows a substantial leap forward in the insurance sector, which would create more inclusive and sustainable insurance policies for the senior citizenry.