Aging India, shrinking cover: Is our health insurance future-ready?
Across India, families are learning that while life expectancy has improved, their health coverage has not kept pace with rising costs.
- Sep 3, 2025,
- Updated Sep 3, 2025 1:07 PM IST
When a 62-year-old retired banker in Pune underwent a knee replacement surgery last year, the bill came to nearly Rs 5.5 lakh. His health policy, purchased a decade ago, covered only Rs 3 lakh. The rest came from his savings the money he had set aside for his daughter’s wedding. His story is far from unique. Across India, families are learning that while life expectancy has improved, their health coverage has not kept pace with rising costs.
This gap raises a pressing question: As India ages, are our health insurance products truly future-ready?
India’s demographic shift is real and fast
According to the United Nations World Population Prospects, 1 in 5 Indians will be over 60 by 2040, up from about 10% today. That means nearly 300 million seniors, a population larger than the US will require long-term, sustained health support.
But here’s the challenge: chronic illnesses, lifestyle diseases, and elderly care are expensive and recurring. The World Health Organization notes that India already spends over 47% of health expenses out-of-pocket down from 69% two decades ago, but still double the global average of 20%. For seniors, this burden is even heavier because most policies are capped at Rs 3–5 lakh and exclude outpatient expenses, physiotherapy, or home care all of which older citizens rely on.
Why today’s cover shrinks with age
Two systemic realities shape the shrinking cover problem:
1. Limited product design – Many policies were built for short-term hospitalization, not long-term geriatric care. Outpatient treatments, medicines, and assisted living support remain largely uncovered.
2. Premiums that rise sharply – IRDAI’s data shows that premiums for a 60+ individual can be 2–3x higher than what a 40-year-old pays, making sustained coverage unaffordable just when it’s needed most.
3. Sum insured vs. inflation – While medical inflation in India runs at 12–14% annually (PwC Health Report 2023), many customers are still on policies capped at Rs 3–5 lakh. What seemed sufficient a decade ago now barely covers one hospitalization.
A family’s quiet realization
Take the example of a Delhi couple in their late 50s. Their father developed early-stage dementia. While hospitalization costs were reimbursed, monthly expenses for home care and therapy about Rs 40,000 were not. Within a year, they realized their savings were depleting faster than expected. Their insurance was not inadequate because the company failed them; it was inadequate because it was never designed for this stage of life.
This quiet realization is hitting more Indian families every year.
Signs of progress but are they enough?
To be fair, insurers have started responding. Over the last five years, we’ve seen:
● Super top-up covers that expand protection at relatively low costs.
● Senior citizen plans with higher entry ages and lifelong renewability.
● Critical illness riders that offer lump-sum payouts on diagnosis.
● Wellness-linked discounts where healthier lifestyles lower premiums.
IRDAI has also mandated simpler policy wordings, faster claim turnarounds, and standardized products like Arogya Sanjeevani to improve accessibility.
Yet, for a country heading into a “silver wave,” the scale of reform required is bigger.
What needs to change
To make health insurance truly future-ready for aging India, three shifts are critical:
1. Redesign for long-term care – Policies must evolve beyond hospitalization, covering outpatient care, medicines, physiotherapy, mental health, and assisted living. Many Asian peers (like Japan and Singapore) have already integrated long-term care models into mainstream insurance. India will need its own version.
2. Affordability across age bands – Premium pricing should balance sustainability with accessibility. Options like community-rated pools, government co-pay models, or tax incentives for elderly policies can reduce the load on individuals.
3. Awareness and action at 40, not 60 – The biggest gap today is timing. Too many Indians buy their first serious health cover after 50, when premiums are steep and options limited. If families start upgrading cover in their 30s and 40s, they can lock in higher sums insured and lower long-term costs.
The way forward: preparing today for tomorrow
India’s health insurance industry has made remarkable strides digital claims, simplified products, and wider inclusion are all steps forward. But the next test will not be about speed or efficiency. It will be about resilience. As our parents age and eventually as we do the true measure of progress will be whether a family can face a chronic illness without fearing financial ruin. That requires insurers, regulators, and policyholders to think 20 years ahead, not just one. The retired banker in Pune should not have to choose between his daughter’s wedding and his own health. That choice is what future-ready insurance must eliminate.
(Views are personal; the author is Joint Chairman and MD at BajajCapital)
When a 62-year-old retired banker in Pune underwent a knee replacement surgery last year, the bill came to nearly Rs 5.5 lakh. His health policy, purchased a decade ago, covered only Rs 3 lakh. The rest came from his savings the money he had set aside for his daughter’s wedding. His story is far from unique. Across India, families are learning that while life expectancy has improved, their health coverage has not kept pace with rising costs.
This gap raises a pressing question: As India ages, are our health insurance products truly future-ready?
India’s demographic shift is real and fast
According to the United Nations World Population Prospects, 1 in 5 Indians will be over 60 by 2040, up from about 10% today. That means nearly 300 million seniors, a population larger than the US will require long-term, sustained health support.
But here’s the challenge: chronic illnesses, lifestyle diseases, and elderly care are expensive and recurring. The World Health Organization notes that India already spends over 47% of health expenses out-of-pocket down from 69% two decades ago, but still double the global average of 20%. For seniors, this burden is even heavier because most policies are capped at Rs 3–5 lakh and exclude outpatient expenses, physiotherapy, or home care all of which older citizens rely on.
Why today’s cover shrinks with age
Two systemic realities shape the shrinking cover problem:
1. Limited product design – Many policies were built for short-term hospitalization, not long-term geriatric care. Outpatient treatments, medicines, and assisted living support remain largely uncovered.
2. Premiums that rise sharply – IRDAI’s data shows that premiums for a 60+ individual can be 2–3x higher than what a 40-year-old pays, making sustained coverage unaffordable just when it’s needed most.
3. Sum insured vs. inflation – While medical inflation in India runs at 12–14% annually (PwC Health Report 2023), many customers are still on policies capped at Rs 3–5 lakh. What seemed sufficient a decade ago now barely covers one hospitalization.
A family’s quiet realization
Take the example of a Delhi couple in their late 50s. Their father developed early-stage dementia. While hospitalization costs were reimbursed, monthly expenses for home care and therapy about Rs 40,000 were not. Within a year, they realized their savings were depleting faster than expected. Their insurance was not inadequate because the company failed them; it was inadequate because it was never designed for this stage of life.
This quiet realization is hitting more Indian families every year.
Signs of progress but are they enough?
To be fair, insurers have started responding. Over the last five years, we’ve seen:
● Super top-up covers that expand protection at relatively low costs.
● Senior citizen plans with higher entry ages and lifelong renewability.
● Critical illness riders that offer lump-sum payouts on diagnosis.
● Wellness-linked discounts where healthier lifestyles lower premiums.
IRDAI has also mandated simpler policy wordings, faster claim turnarounds, and standardized products like Arogya Sanjeevani to improve accessibility.
Yet, for a country heading into a “silver wave,” the scale of reform required is bigger.
What needs to change
To make health insurance truly future-ready for aging India, three shifts are critical:
1. Redesign for long-term care – Policies must evolve beyond hospitalization, covering outpatient care, medicines, physiotherapy, mental health, and assisted living. Many Asian peers (like Japan and Singapore) have already integrated long-term care models into mainstream insurance. India will need its own version.
2. Affordability across age bands – Premium pricing should balance sustainability with accessibility. Options like community-rated pools, government co-pay models, or tax incentives for elderly policies can reduce the load on individuals.
3. Awareness and action at 40, not 60 – The biggest gap today is timing. Too many Indians buy their first serious health cover after 50, when premiums are steep and options limited. If families start upgrading cover in their 30s and 40s, they can lock in higher sums insured and lower long-term costs.
The way forward: preparing today for tomorrow
India’s health insurance industry has made remarkable strides digital claims, simplified products, and wider inclusion are all steps forward. But the next test will not be about speed or efficiency. It will be about resilience. As our parents age and eventually as we do the true measure of progress will be whether a family can face a chronic illness without fearing financial ruin. That requires insurers, regulators, and policyholders to think 20 years ahead, not just one. The retired banker in Pune should not have to choose between his daughter’s wedding and his own health. That choice is what future-ready insurance must eliminate.
(Views are personal; the author is Joint Chairman and MD at BajajCapital)