Medical Inflation and Enhanced Coverage Drive Rising Claims
Key Highlights:
- What: Health insurance claims have surged over 30% in the past three years due to higher medical costs and increased health cover adoption.
- When: Data for fiscal 2025, with trends observed post-Covid.
- Why: Rising hospitalization expenses, medical inflation, and greater awareness about comprehensive health insurance.
- Who: Younger policyholders aged 18-35 account for 38% of claims.
The average health insurance claim amount in India has increased by over 30% in the past three years, fueled by higher medical expenses and expanded insurance coverage options. According to PB Fintech’s Policybazaar, the average claim amount in fiscal 2025 stood at ₹81,000, with Tamil Nadu reporting the highest average claim at ₹1.13 lakh.
The Gurugram-based insurance distributor, which processes 15,000-20,000 claims annually, attributed this surge to post-Covid medical inflation and a growing preference for add-on health cover options. “Post-Covid, the cost of health treatment has gone up significantly, accounting for medical inflation. We are also seeing more customers opting for add-on covers, which include consumables in their health cover, pushing up the claim amounts,” said Siddharth Singhal, head of health insurance at Policybazaar.
Increased Claim Frequency and Changing Demographics
Policybazaar’s data revealed a rise in claim frequency, from 4.9 claims per policyholder in fiscal 2023 to 6.4 in fiscal 2025. Seasonal illnesses like Dengue and repeated hospitalizations have contributed significantly to this trend. Interestingly, young consumers aged 18-35 form a significant portion of claims, accounting for 38% of total payouts.
Growing Demand for Comprehensive and Modular Insurance
The growing demand for customizable insurance plans is reshaping the industry. Insurers are designing modular products that allow customers to pay separately for riders and add-on benefits. “Insurance companies are looking at these data to manage the premiums charged to customers since claims are a major cost item for their business,” Singhal explained.
On the term insurance side, heart ailments are the second largest cause of claim payouts, contributing 25-30%, followed by natural causes (30-35%). Additionally, critical illness and accidental death covers are becoming increasingly popular. Around 35-40% of customers now opt for these add-ons alongside regular term insurance products, reflecting the growing demand for comprehensive coverage.
As medical costs rise and health awareness improves, the Indian insurance landscape continues to evolve with innovative products designed to meet the diverse needs of policyholders.
