Indian health insurers could increase health insurance premiums by 10% to 15% in the Indian capital Delhi to counter higher claims due to the impact of rising air pollution in the city. Insurance Samadhan’s Ms Shilpa Arora shares her thoughts on how things could pan out.
The Indian capital Delhi witnesses record-breaking air pollution year after year during the winter season from November to January. The foul air has led to a sharp rise in hospital admissions for respiratory and cardiovascular conditions, including asthma and chronic obstructive pulmonary diseases. The second half of 2024 saw a notable increase in respiratory-related hospitalisations, rising to nearly 18% from just 5-6% in the first half of the year.
Pollution insurance
At present, Indian health insurers do not offer covers exclusively for pollution-related health issues. Health insurance plans can, however, be customised with riders to increase protection for pollution-related health risks.
Some standard health insurance plans do, however, cover conditions like asthma, chronic obstructive pulmonary disease and cardiovascular ailments that are exacerbated by rising pollution levels. According to industry sources, India could see a rise of seven to nine percent in respiratory ailments over the next decade due to pollution.
Pollution-based city-specific health insurance policies look set to emerge in India. These would be insurance plans under which air pollution levels would impact health insurance premiums directly.
Recently an insurer introduced one of India’s first Air Quality Index (AQI) based parametric insurance for migrant labourers who were affected by the suspension of construction on days of excessive air pollution in the Delhi National Capital region. This parametric insurance cover offered to 6,200 migrant workers in the region will attract claims if the daily AQI breaches 400 beyond two strikes.
Pollution-based premium
Health insurance pricing based on pollution levels in Delhi could lead to a spiralling effect. Now, it is pollution; next, it could be heatwaves and more. It could lead to an unsustainable situation for both the industry and insurance customers.
Speaking with Asia Insurance Review, Insurance Samadhan co-founder and COO Shilpa Arora said, “Yes, I agree that pricing health insurance based on pollution levels could trigger a spiralling effect, which might ultimately become unsustainable. In fact, factoring in other parameters that have come into being because of climate change could inflate premiums and make insurance plans unaffordable for many, especially senior citizens.
“However, we cannot altogether disregard the need for coverage that offers protection against evolving challenges like air pollution and its impact on our health. Over time, insurers would start feeling the claim burden and eventually pass it on to their customers and policyholders. Hence, now is the right time to develop a balanced and systematic approach to ensure that in the long run the situation does not become unsustainable for both insurers and policy buyers.”
Between 2023 and 2025, insurance claims for respiratory illnesses in the country jumped by 8.3%, while healthcare costs related to respiratory disorders surged by 10-12% on a year-on-year basis. Delhi also recorded the highest increase in healthcare costs across India during this period.
The approach to take
Ms Arora said, “Focusing on developing risk management strategies, making reasonable premium adjustments and capping annual premium hikes could be the right approach. These will factor in the interests of insurance companies and consumers and result in a viable solution.”
She said, “The insurance industry has no other option but to prepare itself for the evolving new-age challenges. Indeed, insurers are adapting to cater to environmental concerns and health risks, but the degree of readiness varies across players.
“Unless we have stronger collaborations between government, industry and regulators, we cannot be too sure of how the industry will cope with the demanding situation or implement pricing strategies as needed. In such a scenario, the role of the government becomes very important. It has the upper hand when it comes to developing and implementing strict pollution mitigation strategies.”
She added,” Timely measures can safeguard the environment, moderate pollution-induced health concerns and reduce the burden on the insurance sector. This way, we can overall bring down the risk of unsustainability. Insurance providers should consider giving discounts on premiums to policyholders for good health practices based on a criterion around the BMI and some more basic tests.”
Health insurers in India do promote preventive health measures like staying hydrated, wearing face masks, and engaging in regular indoor exercises. These help to reduce the health impact of pollution. Some insurers also offer wellness and preventive health check-ups, digital wellness resources, access to specialists for pollution-related health issues. A few insurers also offer coverage of alternative treatments that include yoga, ayurveda, naturopathy, etc.
Technology
Turning to the technological readiness of the insurance industry that would allow it to move on to city-specific health insurance pricing and the available customer base, Ms Arora said that insurers “need to leverage government data and demographics to understand city-specific gaps and address them accordingly.”
She acknowledged, “There are concerns that city-specific pricing models could affect equity and affordability when accessing insurance coverage. While the course is challenging, the industry is definitely more than ready to discuss it.”
She said, “We should speak now so that we have a viable solution before a crisis erupts. Above all, it is time to personalise insurance products based on demographics and lifestyle.”
Penetration rate
Responding to a query about technology adoption, distribution models and customer satisfaction, Ms Arora said, “After the pandemic, the insurance sector has been embracing technology very rapidly to enhance its offerings and services. More insurance companies are now investing in AI systems and digital onboarding tools, and this approach has definitely improved insurance penetration to a notable extent.
“The overall penetration rate, however, especially in the rural areas, still remains low. India’s overall insurance penetration rate is 3.7%, much lower than the global average of 7%. Hence, the industry needs to do more by leveraging technological advances to cater to the evolving insurance needs of the population. The sector could also benefit by expanding its digital outreach and tailoring microinsurance for customers at the bottom of the pyramid.”
Standardisation
Speaking about standardisation, Ms Arora said, “The insurance industry has made notable strides towards standardisation in health insurance.
“A lot more, however, needs to be done to ensure complete standardisation of the healthcare sector. Setting up a dedicated healthcare regulator, enhanced government collaboration and increased cooperation between insurance industry and healthcare community would be important to achieve this goal.”
“The IRDAI has already put in place standardisation guidelines on health insurance, which include standard definitions for 42 terms in health insurance policies. Also available now are standards for discharge summaries and billing formats. These are helping to increase transparency and streamline claims for insurers and consumers by reducing ambiguities.”
“The Federation of Indian Chamber of Commerce and Industry has also brought out very useful standard treatment guidelines that have helped align healthcare practices with insurance requirements.” A