Paying more for insurance doesn’t always mean better protection; here’s why


India Is Waking Up to Insurance and That’s a Good Thing

For decades, insurance in India was treated like a checkbox, bought in a hurry, parked in a drawer, and only remembered when things went wrong. 

But that’s changing. We’re finally seeing the shift.

In FY24, retail health insurance premiums crossed ₹74,000 crore, a 22% jump from the previous year. Life insurance penetration reached 3.7% of India’s GDP, and motor insurance adoption surged, especially in metros and flood-prone Tier 1 cities.

More importantly, first-time buyers are younger, more informed, and more proactive. They’re not just buying insurance because they have to but because they want to secure what matters.

This is progress. But with progress comes new complexity and new pitfalls.

Because paying more for insurance doesn’t automatically mean you’re better protected.

The Costly Surprise That Too Many Face

A 52-year-old salaried professional, health-conscious and financially disciplined, opted for a “premium” health insurance policy. ₹42,000 a year. A well-known brand. A large hospital network. No compromises.

Then came his scheduled knee replacement.

The total bill?

• ₹2.5 lakh for the surgery
• ₹60,000 for the room
• ₹30,000 for post-op care including physiotherapy and robotic assistance

He expected full coverage.

What he got:

• Only part of the surgery covered
• Room rent denied due to category mismatch
• Robotic assistance and physiotherapy excluded as outpatient care

Despite buying what he believed was a top-tier plan, over 40% of the cost came from his own pocket. It wasn’t the insurer’s fault. It wasn’t his either.

The problem was the gap between what the policy promised on the surface and what it actually covered underneath.

The New Reality: Premiums Are Up, But So Are Claim Rejections

According to IRDAI’s 2024 data:

• Complaints related to health and motor insurance claims rose 18% year-on-year, with most grievances stemming from room rent capping, sub-limits, and network hospital exclusions.
• In claims above ₹1 lakh, nearly 8 out of 10 cases are either partially settled or delayed, not due to fraud but due to misunderstood clauses and technicalities.
• In urban India, 40% of policyholders cannot correctly explain their policy’s exclusions.

So yes, Indians are spending more on insurance but often for features they may never use, while missing out on coverage that truly matters.

The 4 Myths That Are Costing Indians More

1. “Higher premium = better coverage”

Not always. Premium pricing could be driven by brand value, added features like wellness discounts, or optional benefits you may not need. Meanwhile, critical elements like ICU cover or engine protection might still be capped or missing.

2. “If it’s expensive, it must cover everything”

Even the most expensive health policies may have disease-wise caps, exclude robotic surgeries, or limit maternity and daycare procedures. In motor insurance, “comprehensive” often doesn’t include flood damage unless explicitly added.

3. “I’m covered everywhere”

Insurers operate through empanelled networks. If your preferred hospital or garage isn’t listed, your claim could be non-cashless or heavily deducted. Always check the current network list not just the brochure.

4. “I have both corporate and personal insurance, so I’m sorted”

Corporate policies often come with limited sum insured (₹2–5 lakh), lack riders like critical illness or room upgrades, and are non-portable. Dual coverage doesn’t guarantee double payout it depends on claim coordination clauses.

So What Should You Do Instead?

The good news? We’re entering an era where awareness is rising fast. And small, informed actions can go a long way. Here’s a smarter, more empowered approach:

1. Read the full policy document

It may be long and technical—but it’s the only place where the fine print lives. Look out for:

• Room rent limits (is it percentage-based or category-based?)
• Disease-specific caps (₹50,000 for cataracts? ₹1 lakh for cardiac?)
• Add-on riders (are they included or optional?)
• Waiting periods and pre-existing exclusions

2. Ask your advisor the right questions

Treat your insurance like an investment not a blind purchase. Some good questions:

• Is robotic surgery covered?
• What is the exact room category allowed?
• Are network hospitals within my city?
• Can I upgrade my plan after 2 years?

3. Compare based on value not just price

Don’t let premium pricing fool you. A ₹25,000 policy with fewer caps may offer better protection than a ₹40,000 one with flashy benefits but basic coverage.

Motor example: A ₹20,000 plan with zero-dep + engine protection > ₹30,000 one without it.

4. Speak to a certified financial advisor not just an agent

An advisor understands your lifestyle, risk appetite, dependents, and life stage and helps you build a well-rounded portfolio. Not just sell a policy.

5. Review your policy every 2–3 years

Had a child? Changed jobs? Bought a car? Your insurance must grow with your life. Schedule regular reviews just like you would for your investments or taxes.

Insurance in India Is Maturing. So Must Our Choices.

The best part? We're not where we used to be.

India’s young adults are researching plans online, comparing benefits, watching YouTube explainers, and asking sharper questions. They’re thinking beyond tax-saving. They want real protection.

This cultural shift is powerful.

Now, we must match our intent with awareness.

Because at the end of the day, the costliest mistake isn’t paying a high premium. It’s assuming you’re covered—when you’re not.

So the next time you pick or renew your policy, ask yourself:
Is it just expensive? Or is it truly effective?

(Views are personal; the author is Joint Chairman & MD, BajajCapital)