Pair base insurance policy with super top-up to limit premium cost

Opt for insurers with lenient no-claims bonus policies to tackle need to hike sum insured periodically

Over the past year, health insurance premiums have surged between 10 and 25 per cent, according to industry experts. Customers must make use of all available strategies to cope with the escalating health insurance premiums.

Rising claims  

A key contributor to the surge in health insurance premiums is the increase in the incurred claim ratio (ICR). 

“Individual health insurance policies’ ICR has increased as follows: 73 per cent in 2019-20, 85 per cent in 2020-21, and 96 per cent in 2021-22,” says Nayan Goswami, head-sales & service, SANA Insurance Brokers.

Insurers have borne the brunt of heavy claims over the past three to four years due to the pandemic.

“Premiums need to rise to offset the losses insurers incurred then,” says Kapil Mehta, co-founder, Secure Now.

Another factor is rising healthcare costs which puts more pressure on insurers. “Medical inflation ranges between 14 and 16 per cent in India,” says Goswami.

Premiums have also gone up due to insurers’ willingness to cover patients suffering from chronic ailments.

“Earlier, insurers were reluctant to provide policies to individuals with conditions like hypertension, cholesterol, and thyroid, among others. Now that they issue policies to them, they also need to hike the premiums,” says Mehta.

Customers should bear in mind a few mitigating factors. One, insurers are allowed to hike their premiums once in two or three years, so the increases tend to be lumpy. Many insurers have added new features to their policies. And the increase is not uniform across the board: premiums typically rise more for older age segments that witness higher claims.

Avail of NCB and discounts

Avoid making a claim for a smaller amount so that you are able to get the no claim bonus (NCB). “The accumulation of NCB will enable you to manage your health insurance cost more effectively,” says Rahul M Mishra, co-founder and director, Policy Ensure. Rising sum insured due to NCB accumulation does away with the need to purchase more sum insured to counter medical inflation.

In earlier plans, insurers would withdraw the NCB when a claim was made. “Nowadays, in many plans the NCB is retained even when the customer makes a claim. Some insurers provide a loyalty bonus despite the customer making a claim,” says Goswami.

Several insurers offer fitness-based discounts. “If a customer on average walks a specified number of steps daily, he gets a discount on his renewal premium,” says Mishra.

Consider porting

An insurer who has received a larger number of claims may be compelled to undertake steeper premium hikes. 

“Compare premiums and port to an insurer whose premiums are more attractive,” says Mehta.

Before moving to a new insurer, make sure it has hiked its premiums recently so that you are shielded from further escalation for a couple of years.  

Go for restoration benefit

Many insurers now offer the restoration benefit. Suppose that you buy a sum insured of Rs 10 lakh and use up Rs 5 lakh. The insurer will restore the sum insured, allowing you to enjoy a sum insured of Rs 10 lakh in that very year. “Ensure the restoration benefit is available for the same disease and not only for a new disease,” says Goswami.

Opt for co-pay

If you are very keen to reduce the premium, consider co-pay. “Whatever the hospital bill amounts to, the customer is responsible for paying a certain percentage of it,” says Mehta. Ideally, one should limit co-pay to 10-15 per cent.

Buy a super top-up

In the post-Covid era, customers desire a higher cover.

“Rather than enhancing the sum insured on the base cover, which is expensive, one can buy a super top up (STU) policy, which tends to be less expensive,” says Mishra. The deductible (the amount the customer must pay before the STU kicks in) can be equal to the base policy’s sum assured.

Goswami recommends a base policy of Rs 10 lakh (for those residing in metros) combined with an STU of Rs 50-90 lakh.

“The STU would be 60-70 per cent cheaper than the base plan, if not more,” Goswami adds.