 "Pollution surge in Delhi may drive up health insurance costs by 10-15%")
Health insurance premiums in the national capital could soon see a significant hike as insurers consider factoring in the effects of air pollution when pricing policies. Discussions are underway to impose a 10-15 per cent increase in premiums for new health insurance policies in Delhi following a surge in pollution-related claims in 2024, a report by Reuters claimed, citing industry executives.
If approved by the Insurance Regulatory and Development Authority of India (Irdai), this would mark the first instance in the country where air pollution is directly considered in determining health insurance costs. The move could also pave the way for similar price hikes in other cities grappling with severe air quality issues.
Air pollution in Delhi NCR
Delhi’s air quality deteriorates each winter due to a combination of vehicle emissions, industrial pollution, construction dust, and smoke from crop-burning in neighbouring states.
On November 18, the national capital’s Air Quality Index (AQI) reached 491 out of 500 — an extreme level that can severely impact even healthy individuals.
If insurance providers secure regulatory approval to incorporate air pollution into pricing models, it could establish a precedent for other metropolitan areas struggling with hazardous air quality.
Surge in pollution-related medical cases
The capital witnessed record-breaking air pollution in 2024, which led to a sharp rise in hospital admissions for respiratory and cardiovascular conditions, including asthma and chronic obstructive pulmonary disease (COPD). The second half of 2024 saw a notable increase in respiratory-related hospitalisations, rising to nearly 18 per cent from just 5-6 per cent in the first half of the year.
A joint report by the Boston Consulting Group and Indian healthcare administrator Medi Assist highlighted that health insurance claims linked to respiratory illnesses in Delhi rose by 8.3 per cent from the financial year 2023 to 2025. Delhi also recorded the highest increase in healthcare costs across India during this period.
Insurers call for pollution-based pricing
Leading insurance providers such as Star Health and ICICI Lombard have indicated that poor air quality could soon become a key factor in setting premiums if pollution levels remain critically high. Bajaj Allianz General Insurance has also suggested that insurers may introduce specific clauses to address pollution-related health risks in policy terms.
However, to implement such a change, insurers must first submit evidence to Irdai demonstrating a direct correlation between toxic air and increased health insurance claims.
Expensive health insurance
Currently, an annual health insurance policy covering Rs 8 lakh to Rs 33 lakh for a family in Delhi costs between Rs 8,000 and Rs 32,000. If premiums rise, many residents may find quality healthcare coverage increasingly out of reach. Especially, as this form of claim may disproportionately impact those most vulnerable to pollution, including senior citizens, children, and outdoor workers.
Additionally, hopes of a Goods and Services Tax (GST) reduction on health insurance premiums were dashed after the GST Council made no announcements regarding tax relief during its December meeting. At present, an 18 per cent GST is levied on health and life insurance premiums, adding to policyholders’ financial burden.
In the financial year 2023-24, the Indian government collected Rs 16,398 crore in GST from health and life insurance policies, including Rs 8,263 crore from health insurance alone. While there have been discussions to exempt GST on premiums for policies with coverage up to Rs 5 lakh, no formal decision has been made.