Economic Survey 203-24: Health insurance sector to grow 9.7% annually over the next 5 years

Union Budget: The health insurance sector in India is experiencing a boom, with premiums growing at the fastest rate among all non-life insurance categories in the financial year 2023 (FY23). According to the Economic Survey 2023-24, health insurance premiums accounted for approximately 35% of the total written premiums in FY23, and are estimated to have grown by a significant 11%. The sector saw the fastest growth amongst all nonlife lines in FY23.

The Economic Survey attributes this growth to several factors. "Increased health awareness, supportive government policies, rising medical costs and innovations in Insurtech have supported this growth. Although price and income constraints may limit demand for the lower income groups, the expanding middle class and increased discretionary spending are expected to support overall growth," per the survey.

Prasun Sikdar, MD and CEO, of ManipalCigna Health Insurance, said, “Despite some progress over the years, India’s healthcare spending is still low compared to the global average, necessitating a substantial boost in healthcare spending. Thus, in the upcoming union budget, we expect the Finance Minister to announce a higher allocation of funds for healthcare compared to what was proposed in the interim budget to meet the targets of the National Health Policy."

Further, to provide health insurance to low-income households, Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) and State government extension schemes are in place. Recently, ABPMJAY achieved a milestone of generating 34.2 crore Ayushman cards across India, with 49.3 per cent of them held by females. In the medium term, health premiums are projected to grow by 9.7 per cent annually in 2024-28, with regulatory initiatives to improve the attractiveness of insurance offering some support, per the survey.

While the health insurance sector is projected to maintain its momentum, analysts predict medium-term growth positive until the next five years, with further regulatory initiatives expected to enhance the attractiveness of health insurance offerings.

However, Sikdar says, "The vision set by the insurance regulator, IRDAI, of achieving Insurance for All by 2047, is important, marking a century of India's independence. Thus, our sincere submission to the government is to reduce the current 18% GST rate on essential services like Health Insurance. Further, specific segment considerations are also required especially for middle-income and senior citizen segments who are struggling to meet the rising healthcare costs. Lowering the GST burden on the health insurance premiums will be a huge respite for missing middle and senior citizens to get access to the quality healthcare they need and help to significantly boost insurance penetration across India by driving affordability,”