In India, health insurance remains optional and the healthcare system is divided into public and private sectors, with free healthcare services available only at government-run facilities in the public sector. Industry estimates reveal that the health insurance market is significantly underpenetrated with nearly 40 million people lacking health coverage. Lack of awareness, affordability issues and limited reach are some of the major reasons for low health insurance penetration.
The Covid-19 pandemic has increased awareness of health risks and financial preparedness tenfold. Despite this growing awareness, there remains a significant “missing middle” segment: people who recognise the importance of insurance but face barriers related to affordability and availability of relevant products.
This evolving landscape presents an attractive opportunity for the private sector. Health insurers seek to fill the gap in coverage and expand their market reach. Moreover, with the workforce share at nearly 56% as per the latest Annual Periodic Survey on Labor report, and largely comprised of Gen Y and Gen Z, there is a pressing need for health insurance solutions that are affordable, easily accessible and relevant to young customers.
Challenges
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 need. Moreover, the cost of quality healthcare system in India has risen considerably, making affordability one of the biggest hurdles for customers when it comes to health insurance premiums. Traditional retail health insurance policies often come with high premiums, posing a challenge for many young professionals. These individuals are looking for health insurance solutions tailored to their financial capabilities and specific needs. They need policies that offer value beyond basic hospitalization coverage, including benefits such as outpatient department or OPD consultation services, chronic disease management, and even wellness packages.
Big vs. small cities
India’s health insurance market is evolving and key trends are emerging to meet the diverse needs of young professionals. Notably, there is a clear trend in Tier 3 and Tier 4 cities as compared to metros, in Tier 3 and Tier 4 cities, healthcare costs are relatively low and most customers opt for basic coverage that meets their immediate healthcare needs.
In tier 1 and tier 2 cities, where healthcare costs are substantially higher, insurers are witnessing a shift towards policies with higher sums insured. Products offering features such as unlimited recovery of sum insured and guaranteed bonuses are gaining popularity, reflecting a shift towards more flexible and comprehensive coverage options. With rising healthcare costs in metros and the rise in lifestyle-related diseases such as diabetes, hypertension and heart problems, customers are demanding coverage for disease management programmes and shorter waiting times for pre-existing conditions.
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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 disease management packages that cover preventive care, consultations and diagnostic tests. In addition, some major insurance companies have started offering products for people with borderline or early-stage diabetes.
Expectations of young customers
Many insurance companies now offer coverage for OPD consultations. Apart from the OPD functionality offered by the product, the user experience in terms of a seamless experience without dependency on the insurer is something that this young customer segment is inclined towards. These OPD benefits often include coverage for consultations, diagnostic tests, dental treatment, eye treatment or teleconsultations. In addition, young customers value wellness packages that include diet and nutrition management or disease management programmes.
There is a significant gap between current market offerings and the expectations of generations Y and Z. For instance, one in every six couples in India suffers from infertility, and the cost of infertility treatments is very high, but very few insurance companies offer comprehensive infertility coverage. Moreover, most insurers generally exclude coverage for sports injuries, despite the fact that customers under 30 years of age typically engage 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 Z are looking for personalized, transparent, and digitally accessible health insurance products. 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 broad segment.
Conclusion
Like the health insurance market As the 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, improving affordability, enhancing accessibility through digital platforms, and ensuring transparency in product features. According to projections made by the IMF (International Monetary Fund), India is on track to overtake Japan and become the world’s fourth-largest economy by the end of 2025. However, India’s health insurance industry needs to catch up and move even faster to address the changing needs of “young” India to reap the demographic dividend.
Dr. Santosh Puri is Senior Vice President, Health Products and Processes at Tata AIG General Insurance
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