India, often heralded as the world's fastest-growing economy, boasts a population exceeding 1.4 billion, presenting a vast and largely untapped health insurance market globally.
In India, health insurance remains optional and the healthcare system is divided into public and private sector, with free healthcare services available only at government facilities under the public sector. Industry estimates reveal that the health insurance market is significantly underpenetrated, with nearly 40 million people lacking any health cover. Lack of awareness, affordability issues and limited reach are some of the key reasons for low health insurance penetration.
The covid-19 pandemic has significantly heightened awareness about health risks and financial preparedness nearly ten-fold. Despite this growing awareness, a substantial 'missing middle' segment persists—individuals who acknowledge the importance of insurance but face barriers related to affordability and availability of relevant products.
This evolving landscape presents a compelling opportunity for private health insurers to bridge gap in coverage and expand their market reach. Moreover, with a working population ratio of nearly 56% as per the latest Annual Periodic Labour survey report, and comprising largely of Gen Y and Gen Z, there is a pressing need for health insurance solutions that are affordable, easily accessible and relevant for young customers.
One of the key issues in the current market is the lack of visibility regarding the value proposition of health insurance, leaving many unsure of its immediate necessity. Additionally, the cost of quality healthcare system in India has risen manifold, making affordability one of the most prominent hurdles for customers when it comes to health insurance premiums. Traditional, retail health insurance policies often come with hefty premiums, posing a challenge for many young professionals. These individuals are seeking health insurance solutions tailored to their financial capabilities and specific needs. They require policies that offer value beyond basic hospitalization coverage, including benefits such as out patient department or OPD consultation services, chronic illness management, and even wellness packages.
India’s health insurance market is evolving, with key trends emerging to meet the diverse needs of young professionals. Notably, there are distinct trend in tier 3 and tier 4 cities as compared to metropolitan areas, in tier 3 and tier 4 cities, where healthcare costs are relatively low, with most customers opting for basic coverage that meets their immediate healthcare needs.
In tier I and tier 2 cities, where healthcare costs are substantially higher, insurers are witnessing a shift towards higher-sum insured policies. Products offering features like unlimited restoration of the sum insured and guaranteed bonuses are gaining popularity, reflecting a shift towards more flexible and comprehensive coverage options. With rising health care costs in metros and the rise of lifestyle diseases like diabetes, hypertension and heart issues, customers are demanding coverage for disease management programs and reduced pre-existing disease waiting.
Some private insurers are focusing not only on covering the curative aspects of healthcare but also on the cost of disease management and prevention. This includes chronic illness management packages that cover preventive care, consultations and diagnostic tests. Additionally, some leading insurance companies have started offering products for individuals with borderline and early-stage diabetes.
Many insurance companies are now offering coverage for OPD consultation. Apart from OPD feature offered in the product, the utilization journey in terms of seamless experience with zero dependency on the insurer is something this young customer segment is inclined towards. These OPD benefit often include coverage for consultation, diagnostic tests, dental treatment, vision treatment or teleconsultations. Additionally, young customers value wellness packages that include diet and nutrition management or disease management programmes.
There is a significant gap between the current offerings in the market and the expectations of Gen Ys and Gen Zs. For instance, one in every six couple in India suffers from infertility, and cost of infertility treatments is very high, but very few insurance companies offer comprehensive infertility coverage. Additionally, sports injury cover is generally excluded by most insurers, despite the fact that customers under 30 are often involved in sports, adventure activities and regular gym workouts. This segment specifically looks for health insurance that covers gym or sports-related injuries.
Millennials and Gen Zs seek customized health insurance products with transparency and digital accessibility. They want tailored solutions that align with their lifestyle choices and health priorities such as coverage for sports injuries, infertility treatments, and global healthcare needs. Clearly more needs to be done to address the specific needs of this vast segment.
As the health insurance market evolves, bridging the gap between affordability and comprehensive coverage remains a critical challenge. Insurers must innovate and adapt their offerings to better serve the needs of India’s young professionals. This involves expanding coverage options, enhancing affordability, improving accessibility through digital platforms and ensuring transparency in product features. According to the projections made by IMF (International Monetary Fund), India is on track to surpass Japan to become the fourth-largest economy in the world by the end of 2025. However, India’s health insurance industry needs to catch up and move even faster to address the evolving needs of ‘young’ India to reap the demographic dividend.
Dr. Santosh Puri is senior vice president-health product & process at Tata AIG General Insurance
