Health insurance renewals in India have reached unprecedented persistency levels in FY26, marking a significant transformation in how consumers view and engage with health coverage. The number of policy persistencies has surged by approximately 400 basis points, while gross written premium persistency has climbed even more dramatically by nearly 700 basis points. This represents a fundamental shift from treating health insurance as a yearly expense to viewing it as a growing financial asset.
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Key Drivers Behind Record-High Persistency
Rising Healthcare Costs Creating Urgency
Healthcare costs in India are projected to rise by 13 percent in 2025, exceeding the global average of 10 percent and up from 12 percent recorded the previous year. Medical inflation has consistently hovered at 13-14% annually, which is double the pace of general inflation and far beyond wage growth for most Indians. This stark reality has made health insurance coverage not just desirable but essential for financial protection.
The cost of hospitalization, advanced procedures, and routine diagnostics has climbed dramatically over the past decade. Heart surgeries, cancer treatments, and critical care interventions now routinely cross the Rs 30-40 lakh mark, while even cataract surgery can cost over Rs 1 lakh in top hospitals. This dramatic escalation in medical costs has fundamentally altered how families perceive the value of maintaining continuous health insurance coverage.
Increased Health Awareness Post-Pandemic
The pandemic created unprecedented awareness about health risks, but the continued rise of lifestyle-related illnesses has sustained demand for comprehensive health insurance. The share of customers with lifestyle diseases such as diabetes, hypertension, cholesterol issues, asthma, obesity, and heart disease in new business mix has increased by 25 percent in recent years.
This growing prevalence of chronic conditions has made families less likely to discontinue their policies, viewing them instead as a core financial safety net. The shift represents a mature understanding that health insurance is not just about covering emergencies but managing ongoing healthcare needs throughout life.
Product Innovation Driving Stickiness
The rise of modular, feature-rich health plans has emerged as one of the biggest drivers of renewal stickiness. Plans with cumulative bonus features, where coverage automatically grows every year regardless of claims, are proving especially attractive to policyholders. These innovative products demonstrate how a Rs 33,000 premium in 2025 could buy Rs 10 lakh coverage, but by 2030, for nearly the same premium band, coverage could expand to Rs 70 lakh, reducing the cost per Rs 5 lakh cover by over five times.
Customers are increasingly drawn to add-on riders at renewal time, with the most popular being consumables cover, critical illness benefits, daily cash allowances, and bonus covers. This modular approach allows policyholders to customize their coverage as their needs evolve, creating stronger engagement with their insurance providers.
The introduction of Outpatient Department (OPD) coverage represents another significant innovation. Since OPD expenses account for around 62% of healthcare costs, this coverage reduces out-of-pocket expenses and emphasizes preventive care. For healthcare providers, patients with OPD coverage are more likely to seek early treatment, reducing the likelihood of conditions worsening and requiring expensive hospitalization.
Regulatory Changes Supporting Consumer Interests
The Insurance Regulatory and Development Authority of India (IRDAI) has implemented several pro-consumer changes that have enhanced policyholder confidence. The maximum waiting period for covering pre-existing diseases has been reduced from 4 years to 3 years, enabling faster access to coverage for chronic conditions. Similarly, the waiting period for specific diseases like joint replacement surgery has been reduced from 4 years to 3 years.
IRDAI has removed entry age limits, mandating insurers to provide policies for people of all age groups, which is particularly beneficial for senior citizens. The moratorium period has been reduced from 8 years to 5 years, meaning insurers cannot reject claims based on non-disclosure after 5 years of continuous coverage unless fraud is proven. The regulatory authority has also prohibited insurers from refusing policies to people with severe pre-existing diseases such as heart disease, cancer, renal failure, and AIDS, making the insurance ecosystem more inclusive. These changes have created a more customer-friendly environment that encourages policy continuity.
Impact on Insurers’ Profitability
Mixed Profitability Outlook
The health insurance sector faces significant structural challenges affecting profitability. Industry data shows that growth in health insurance premium income has decelerated to 9% for 2024-25, down from over 20% the previous year, as premiums become increasingly unaffordable for many consumers. Rising claim costs present a major challenge. After COVID-19, there has been a shift toward critical illnesses like cancer and heart conditions, leading to higher claim frequency and severity. Hospital occupancy has increased from 52% in FY21 to 64% in FY25, while average revenue per occupied bed has grown at a compound annual growth rate of around 10%.
Loss ratios remain elevated across the industry. The incurred claims ratio varies significantly among insurers, with some companies like IFFCO Tokio reporting ratios exceeding 100%, indicating they pay more in claims than they collect in premiums, while others like Care Health Insurance maintain ratios around 54%.
Competitive Pressures
Increasing competition is adding pressure to insurer margins. The entry of Life Insurance Corporation of India (LIC) into the health insurance segment, along with other life insurance companies expected to enter through composite licenses, is intensifying competition and limiting growth opportunities for traditional standalone health insurers.
Factors such as the shift in policy mix toward older or vintage policies and growing bargaining power of hospitals and insurance distributors are capping insurer margins. The overestimation of the total addressable market for private insurers, combined with expanded government-sponsored health schemes, has reduced the actual market available for private players.
Policyholder Behavior Patterns
Demographic and Coverage Preferences
Clear patterns have emerged in renewal behavior. People aged 30 and above dominate renewals, forming nearly 80% of the consumer base. Family floater policies show slightly higher persistency compared to individual covers, suggesting households prefer comprehensive family protection.
Policies with coverage above Rs 10 lakh demonstrate higher renewal rates, with persistency rising steadily as sum insured increases. This indicates that policyholders who invest in higher coverage amounts are more likely to recognize the value of maintaining continuous protection. Significantly, both metro and non-metro customers are showing equally strong renewal stickiness, suggesting that awareness about health insurance benefits has spread beyond urban centers.
Payment and Engagement Preferences
Research indicates that the majority of policyholders (39.10%) still prefer payment through cheques, while a notable percentage (26.50%) utilizes online payment methods. The growing acceptance of digital payment options reflects the broader digitalization of insurance services.
Engagement duration analysis reveals that 41.50% of policyholders have maintained their coverage for 3 to 5 years, highlighting a stable consumer base, while 31.40% have remained engaged for 6 to 10 years, indicating sustained relationships with insurers.
Overall Insurance Penetration Impact
Market Growth Trajectory
The India health insurance market is valued at USD 14.64 billion in 2025 and is projected to reach USD 21.63 billion by 2030, growing at a compound annual growth rate of 8.12%. In terms of gross written premium, the market was estimated at USD 15.06 billion in 2024 and is projected to grow at a CAGR of 20.9% from 2025 to 2030.
Despite this growth, India’s health insurance penetration remains low at approximately 3.7% in FY24, with life insurance penetration at 2.8% and non-life insurance at 1%. Only around 5 crore individuals have invested in personal retail insurance, and this figure has remained stagnant for several years.
Regional Variations
West India commands a 28.1% market share, driven by Mumbai’s financial services ecosystem and Gujarat’s industrial corridors. However, South India is experiencing the fastest growth at 12.56% CAGR, propelled by Bangalore and Hyderabad’s tech workforce, Chennai’s medical tourism influx, and Kerala’s high health awareness.
North India shows mixed performance, with Delhi’s white-collar base driving high average ticket sizes, while Uttar Pradesh and Bihar lag due to lower per-capita income and inadequate provider networks.
Potential Risks That Could Slow Growth
Affordability Crisis
The most significant risk facing the health insurance sector is an emerging affordability crisis. With premiums climbing 20-25% annually while medical inflation runs at 13-14%, many consumers are reaching their financial limits. Premium collection growth has already slowed to 8.98% in FY25, the weakest growth in nearly a decade.
A LocalCircles survey found that nearly half of one lakh policyholders had faced partial or total claim rejections, creating trust issues that could slow new customer acquisition. Younger, healthier policyholders are beginning to drop coverage, leaving insurers with a shrinking pool of older, sicker clients, which creates a vicious cycle of higher premiums and reduced coverage.
Regulatory and Market Challenges
Government analysis has found that hospitals are inflating treatment costs for patients and overcharging those with higher coverage, driving insurers to charge higher premiums. The government plans to tighten oversight of the National Health Claims Exchange to address this issue, but implementation challenges remain.
The expansion of government-sponsored health schemes like Ayushman Bharat, which now covers over 580 million people and recently added all citizens aged 70+, is reducing the addressable market for private insurers. While this improves overall coverage, it limits growth opportunities for private players.
Structural Industry Challenges
Rising claim costs pose ongoing risks. The shift toward critical illness claims post-pandemic has increased both claim frequency and severity. The aging population directly impacts insurance risk pools, with more people requiring expensive medical care as they age.
Technical debt from outdated technology infrastructures and the need for robust cybersecurity systems to protect sensitive healthcare data represent additional cost pressures that could affect profitability and service quality.
Conclusion
The record-high persistency rates in health insurance renewals for FY26 reflect a maturing market where consumers increasingly view health coverage as an essential financial asset rather than a discretionary expense. Rising healthcare costs, enhanced health awareness, innovative product offerings, and supportive regulatory changes have all contributed to this positive trend. However, the sector faces significant challenges including affordability pressures, competitive intensity, and structural profitability constraints. Success in this evolving landscape will require insurers to balance innovation with cost management while maintaining focus on customer needs and sustainable business models.
The future growth of India’s health insurance market will largely depend on addressing the affordability gap while continuing to expand coverage to underserved populations. Companies that can navigate these challenges while delivering genuine value to policyholders are likely to emerge as leaders in this transforming industry.
References: Health Insurance Renewals Touch All-time High Persistency In FY26, Says Report
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