white black legal international law journal ISSN: 2581-8503

Peer-Reviewed Journal | Indexed at Manupatra, HeinOnline, Google Scholar & ROAD




Authored By: Akshara Bhargava - A8156121004

Co-Author - Mridul Jaiswal - A8156121020

LL.B. 3 years (Semester IV)






Sno.  Topics                                                                           

  1. Abstract                                                                                    
  2. Introduction                                                                              
  3. Factors of low health insurance penetration in India                    
  4. Consequences of not buying a health insurance plan                   
  5. Suggestions to improve health insurance penetration in India       



Health Insurance as a concept is very uncommon in India. Health Insurance is not mandatory in India. Therefore, for most people residing in developing or underdeveloped countries, health insurance is an unknown concept. It is generally presumed that health insurance is for the rich and those who can afford a health insurance policy than the poor. It is often understood that health insurance policies not being mandatory can be avoided as they may be unnecessary expenses on the pockets of the poor than life insurance policies.


However, with the rise of COVID-19 in the year 2019 has seen a peek in the buying of health insurance policies. Nonetheless, the popularity of health insurance is still stagnant in India in general and among the poor in particular. There are certain factors which need to be analysed to come up with health insurance policies which are friendly towards the poor. The research paper, therefore, explores factors of low health insurance penetration among Indians.


Keywords: Healthcare, health insurance, factors of lack of health insurance penetration in India, health insurance policy



India's population is 136.64 million. It is currently her second most populous country in the world, but is expected to soon surpass China in numbers. Health is an important factor for economic success. India has come a long way in terms of medical technology, but with such advancements, healthcare costs have grown as well.

To combat these rising costs, it's important to have health insurance. But sadly, the penetration rate of health insurance in this country is still small. Millions of people spend large sums of money on health care, complicating their financial situation.

Health is a key factor affecting the economy of a densely populated country like India. It is no exaggeration to say that a country's GDP depends on the health of its population. India has many experts who keep the wheels of the economy spinning smoothly. In 2020, India had around 501 million workers.1

Poor health care systems and lack of awareness of health insurance systems in low-lying areas force people to spend a lot of money on health care. Health insurance penetration in India is very low due to limited coverage, lack of awareness and education. This inevitable burden is borne by the people themselves. About 78% of Indians pay for medical services out of their own pocket.2 They are not covered by statutory or private health insurance.

One of the factors driving market penetration is Foreign Direct Investment (FDI). It helps increase insurance awareness and outreach in the country. The recent increase in FDI in the insurance sector from 49% to 74% could push the health insurance industry in this direction.3

India relies heavily on the private healthcare system to meet the healthcare needs of its people. 58% of the country's hospitals are privately owned and 81% of doctors work in these hospitals. This leaves a tight space for those who cannot afford to seek medical services in private hospitals.

According to the National Family Health Survey-34, 70% of urban households and 63% of rural households rely on private hospitals, which typically cost much more than government

1 India’s Labour Reforms

2 TOI Article on Medical Bills’ Payment in India 3 The Economics Times Article

4 National Family Health Survey - 3


healthcare facilities. Therefore, middle and upper class people are more likely to seek services in private hospitals.

Most of the population had limited access to quality medical services and health professionals such as doctors, specialists and nurses. About 80% of Indian health professionals care for only 20% of the population5.

Lack of funding is another factor in the lack of healthcare infrastructure in rural areas. Healthcare privatisation is so widespread that only one-fifth of healthcare is publicly funded. The COVID-19 pandemic has been a wake-up call for both the authorities and the Indian public to take health insurance and health insurance seriously. This has led to a number of fundamental changes in how health insurance works in the country. The mindset of 'it doesn't have to be compulsory' is slowly changing and there is growing interest in the positive aspects of health insurance.

During the 2020 pandemic, health insurance premiums increased by 40%6. Health insurance was the most important non-life insurance sector during the first wave of COVID-19 from April to September 2020, according to the General Industry Council. During this period, the number of policies issued in health insurance surpassed the well-known auto insurance sector. The significant growth is due to a complete lockdown with no vehicles for sale. As a result, no car insurance was sold.

Another major contributor to the higher health insurance business is the introduction of low-cost, regulated health plans like Arogya Sanjeevani, Corona Kavach, and Corona Rakshak. These schemes are available to various marginalised families where medical treatment is given at any affiliated medical facility.











5 Hindustan Times Article 6 Times of India Article



According to a report by Motilal Oswal Financial Services, about 63% of total medical costs are out-of-pocket in India7. This means that the vast majority of Indians will have to deplete their savings or sell their assets to pay for medical bills. However, you don't have to worry about medical bills as health insurance covers most medical bills.


The increase in lifestyle-related diseases and soaring medical costs remind us that it is a great opportunity to invest in health insurance. However, a large portion of India's population has no health insurance at all and is at risk of falling into poverty in the event of a medical emergency.


A Motilal Oswal Financial Services report shows the basic reality of private health insurance penetration in India, which is only around 4%. In contrast, health insurance penetration in the United States is about 92%. It is clear that the majority of Indians do not benefit from health insurance. But what keeps people from buying? Here are some reasons.



Many people think that investing in health insurance puts more strain on their finances. They consider it unaffordable. But in reality, many health insurance policies can be purchased without too many compromises when it comes to financing.


In accordance with IRDAI guidelines, many insurers also offer premium payment options such as quarterly and semi-annually. For example, Star Health and Allied Insurance offer a range of health plans at affordable premiums with instalment options. Also, many people may not be aware that there is an income tax deduction for paying health insurance premiums. The Government of India recognizes the importance of health insurance and provides tax relief under Section 80D of the Income Tax Act, 1961.





7 Motilal Oswal Financial Services Report


Lack of awareness

Lack of public awareness is one of the main reasons health insurance has not permeated the country. Many people have heard of health insurance, but don't consider it an essential investment.


The general idea is that most people who invest expect a guaranteed return. Otherwise they don't consider it worth it. That's why many people don't invest in health insurance. But they often don't realise that a sudden medical emergency can take a toll on their finances. In this case, health insurance acts as a financial shield and covers medical expenses.


Claim Settlement

One of the common misbeliefs amongst most people in India is that health insurance companies do not settle claims of the customers. However, that is not the case. According to IRDAI's annual report, the insurer said he settled about 84% of claims in 2020-2021. This resulted in a total of $1.4 billion in health insurance claims, with an average amount paid per claim of Rs. 30,900/-.


There are many health insurance companies that offer cashless treatment options at partner hospitals. Star Health Insurance is India's first independent health insurer with an extensive network of over 13,000 hospitals offering cashless treatment facilities across India. Treatment can be obtained at any of these network hospitals and the insurance company will settle claims directly with the hospital.


Corporate Policy

Many people think that company policies can cover all their medical needs. However, many group policies are primarily for primary income earners only. If you want to protect your family, you may have to pay an additional premium. However, you can only enjoy this protection while you are enrolled in this organisation.


However, in today's world of uncertain employment prospects and an increase in economic layoffs, it is unwise to rely solely on company policy. Ordinary health insurance, on the other hand, provides people and their families with continuous coverage through continuous renewals, so they are financially protected without interruption.


India, one of the world's largest economies, is still home to millions of poor people, and millions more are at risk of falling into poverty due to medical expenses. It has been. It is clear that there are several reasons why people are discouraged from investing in health insurance. However, it's time to stay protected by including health insurance in your financial plans.


Thinking of not being prone to diseases

We tend to overestimate our ability to resist disease. It's perfectly fine to check your health. But what if you suddenly encounter a health risk? People often decide whether or not to have health insurance based on their current health status.


Still, rising pollution levels, lack of exercise, and rising rates of non-communicable diseases such as diabetes and heart disease show that we are not living in a risk-free environment. Therefore, having adequate health insurance is a wise choice.



Not having health insurance coverage is a significant disadvantage. Everything from getting the best treatment to paying massive medical costs will be harder. There are a great risks involved in not buying a health insurance policy, some of them are as follows:


Loss of Savings:

Today, due to medical inflation, a serious accident or health problem can cost hundreds of thousands of rupees.These expenses have the potential to wipe out a person's savings. With health insurance, your out-of-pocket costs are significantly reduced as your insurance company covers expenses such as hospitalisation and may even offer a flat benefit to help cover other medical expenses.


Lack of Quality Care:

It is important not to have to go without quality medical care and medication in the event of an emergency. If you do not have a solid financial background, you may need to skip some medical care, delay treatment, or choose cheaper treatments. If you have health insurance, you don't have to make this choice because your insurance company will cover the cost.

Falling Into Debt:

When you have to pay large medical bills, you may find yourself giving up on essentials, borrowing money, or even borrowing money from friends and family to pay for it. That means you'll likely have less money to save even after you recover, as you'll need the savings needed to pay your monthly EMI payments to prevent default. However, with health insurance this is not necessary as it reduces costs and protects savings and family savings.


Large Healthcare Expenses:

Unplanned hospitalizations, from accidents to illness, can result in high medical bills if health insurance doesn't cover them. Also, if you have a long-term illness, such as a cancer diagnosis or a serious accident, you may need an expensive treatment plan. Also, health problems are usually unpredictable and can occur without warning, so without health insurance you don't want to be stuck in financial trouble or debt after paying medical bills.


Losing Out on Tax Benefits:

If you have health insurance, you can apply for tax benefits under Section 80D of the Income Tax Act and actually save on income tax. So those savings are lost if you don't have health insurance. Health insurance is certainly an issue. But with all its benefits, it is a smart investment you can make to secure your financial resources and a healthy future for you and your family.


Health insurance acts as a safety net when you need it. so you don't pay all the bills yourself. Climate conditions and an increase in stressful lifestyles are making us more susceptible to illness and accidents than ever before. And such unpredictable circumstances can quickly deplete your savings. there is. That's why health insurance is a necessity, not a luxury.


Increased Stress:

Even though you might have some control over planned hospitalizations, when it comes to unplanned hospitalisation due to unforeseen illnesses or accidents, you never know when it will happen or how it will impact your finances. A lot of anxiety and stress can result from this lack of financial security. Furthermore, even while you are in the medical clinic, you could in any case be worried about covering the bills after release as opposed to focusing on improving. Having health insurance can significantly lessen all of these burdens.



Health insurance portability:

This is another way to improve health insurance. So, if you are not satisfied with your existing plan and its coverage, portability allows you to switch to another health plan. Porting allows you to change your insurance policy with a new insurance company and increase your coverage. However, in this case, it is up to the insurance company to increase the insurance amount.


Get the Sum Insured Enhanced at Renewal:

Renewal is the perfect time to increase your policy amount or health insurance coverage. All health plans must be renewed annually to keep your plan covered. In fact, all health insurance companies offer policyholders the option to increase coverage at renewal. For the next extension, just consider and add the missing aspects of your health insurance.


Buy family floater plans:

Another way to increase health insurance coverage is to choose a family plan rather than an individual plan. A family health insurance plan, or family floater policy, is a broad coverage plan because it includes all dependents. Therefore, families should choose float plans over individual plans.


Buy the Suitable add-ons:

You can choose the right add-on to extend your health insurance coverage. There are many additional benefits available under health insurance that support increased coverage under your plan. These supplements include, for example, maternity supplements, critical illness insurance, accident insurance, and room rental waivers.


Avail the Super Top-Up Plan:

If you would like to upgrade your health insurance coverage, a Super Top-Up plan is also available. This option allows you to insure your medical facility beyond the deductible limit. Additionally, the Super Top-Up plan provides policyholders with improved overall coverage. It also assists policyholders with tax credits under Section 80D of the IT Act 1961.

Purchase health insurance at an early age:

There are many benefits to getting health insurance when you are young, including increased coverage. Getting health insurance early doesn't increase your risk of illness and you don't need to claim health insurance. Therefore, you can get the NCB bonus. People who are fit and healthy can also avail health insurance at a lower premium rate.


Get No Claim Bonus (NCB):

An NCB is a form of compensation offered by insurance companies to policyholders who do not make a health insurance claim during the policy year. If you have earned her NCB on health insurance, you can take advantage of the premium discounts to extend the coverage offered by your insurance plan.


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