Only 17% of population in India has some sort of health insurance whereas a majority of population is still uninsured. People in small towns often avoid buying health insurance products because they find the prices to be too high. In an attempt to increase the penetration of health insurance and bring more people under its ambit, the government has reduced the premium of health insurance in small towns.
Private insurance companies are looking to introduce differential pricing for health insurance products, which will reduce the premium amount by 15-20% in small towns where medical expenses are fairly lower than metros. The move will likely attract buyers in small towns to avail health insurance at an affordable price and increase the overall health insurance coverage in the country.
In 2014, the top six metros in the country reported 25% of all health insurance claims made in the country, which garnered 30% of the total claim amount. The average claim size in the metros varied between ₹35,000 - ₹45,000. On the contrary, the average claim size in states like Bihar and Kerala was between ₹10,500 - ₹15,000, which is a clear indicator of disparity between small towns and metros.
The premium of health insurance typically depends on age of insured person, nature of treatment and the claim history. However, the city where the customer resides is often neglected while setting the premium amount. Several private insurers are looking to include this factor and introduce differential pricing system. Insurers are exploring it and want to provide the best medical experience to customers.
The rationale behind this decision is that people in metro do not cross subsidise for their counterparts in small towns by paying the same premium. This will also ensure that the customers in small towns to pay only for the amount equivalent to the expenses of their medical treatment. A majority of healthcare expenses are funded out-of-pocket in small towns and this initiative is likely to change this scenario.
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