2 January 2026 Punjab Khabarnama Bureau : Health insurance coverage in India expanded steadily in FY25, even as the overall number of new policies sold witnessed a slowdown. The contrasting trend highlights a structural shift in the insurance market, where higher-value policies, renewals, and group coverage are increasingly driving growth rather than sheer volume of new individual policies.
Industry data and expert assessments suggest that while fewer policies were issued compared to the previous year, more people and higher sums were brought under insurance protection. This signals a maturing market where consumers are opting for broader, more comprehensive coverage instead of multiple low-value policies.
Coverage Expansion Despite Slower Sales
FY25 marked a year where health insurance penetration improved in terms of lives covered and sum insured, even though fresh policy issuance declined. The slowdown in policy sales was largely attributed to higher premium costs, inflation-linked pricing adjustments, and cautious consumer spending amid broader economic uncertainty.
However, insurers reported stronger growth in renewals, policy upgrades, and group health insurance, particularly from employers and institutions. As a result, the total insured population increased, even if first-time individual buyers grew at a slower pace.
This trend indicates that existing policyholders are becoming more aware of healthcare risks and are choosing to enhance coverage limits, add riders, or extend policies to family members.
Rising Premiums and Consumer Behavior
One of the key reasons behind the decline in policy sales was the rise in health insurance premiums. Medical inflation, higher hospitalisation costs, and increased claim ratios over the past few years prompted insurers to recalibrate pricing.
For many middle-income households, the higher cost of entry discouraged first-time purchases. At the same time, consumers who already had insurance increasingly recognised the importance of adequate coverage, leading to higher ticket-size policies rather than multiple small plans.
This shift reflects a growing understanding that low-sum policies may not be sufficient to cover modern healthcare expenses, especially in private hospitals.
Group Insurance Drives Coverage Growth
A major contributor to the increase in overall coverage was group health insurance, particularly policies offered by employers. As companies expanded benefits to attract and retain talent, group health plans covered more employees and their dependents.
Startups, mid-sized firms, and large corporates alike enhanced health benefits, often increasing coverage limits or including wellness and preventive care features. These group policies helped bring millions of individuals under health insurance protection, even if they did not purchase individual plans.
Additionally, government-backed health schemes and state-sponsored insurance programs continued to play a role in expanding coverage among economically vulnerable populations.
Renewals and Policy Upgrades Gain Momentum
FY25 also saw strong growth in policy renewals, indicating higher customer retention. Insurers reported that more customers renewed policies on time and opted to increase their sum insured or add critical illness riders.
This trend was driven by heightened health awareness following recent public health crises, as well as rising out-of-pocket medical expenses. Consumers are now more inclined to view health insurance as a long-term necessity rather than a discretionary purchase.
Policy upgrades, such as adding maternity benefits, outpatient coverage, or disease-specific riders, also contributed to higher overall coverage values.
Digital Channels and Market Consolidation
Digital distribution continued to influence the health insurance market, although growth moderated compared to earlier years. Online platforms made renewals and upgrades easier, helping insurers maintain coverage expansion even with fewer new buyers.
At the same time, insurers became more selective in underwriting, focusing on sustainable growth rather than aggressive discount-driven sales. This approach helped improve profitability and claim management, albeit at the cost of slower policy volume growth.
Industry experts believe this signals a move toward quality-driven expansion, where insurers prioritise long-term viability and customer lifetime value.
Challenges Remain
Despite improved coverage, challenges persist. A large segment of the population remains uninsured or underinsured, particularly in informal employment sectors. High premiums, lack of awareness, and complex policy terms continue to act as barriers.
Additionally, rising claim costs and medical inflation pose ongoing risks to affordability. Insurers will need to balance pricing discipline with innovation to ensure health insurance remains accessible to a wider population.
Outlook for the Coming Years
Looking ahead, the health insurance sector is expected to focus on deepening coverage rather than rapid policy expansion. Customised products, preventive healthcare integration, and flexible payment options may help attract new buyers while sustaining existing coverage growth.
If economic conditions stabilise and healthcare costs are better managed, policy sales could regain momentum. Until then, FY25 stands out as a year where coverage depth improved even as sales volumes softened, reflecting a more mature and cautious insurance market.
Summary
In FY25, health insurance coverage expanded through renewals, upgrades, and group policies, even as new policy sales declined due to rising premiums and cautious consumer spending.