Hyderabad: Annual hikes on health insurance premiums are here to stay, says health insurer Star Health and Allied Insurance as the company braces for a mid-to-high single digit premium hike in FY27. Speaking to ET, the company’s MD & CEO Anand Roy said that customers are today willing to absorb mid-to-high single digit hikes given the rising cost of healthcare.
The comments come as the health insurance industry grapples with medical inflation running at 13 to 14 percent annually, putting pressure on both insurers and policyholders alike.
The company is also set to launch a new set of affordable health insurance plans this year, targeting Tier 2 and Tier 3 markets, which will come with a restricted hospital network.
“It will have what we call as preferred network of partners. This will have a limited network of hospitals with whom we have tighter pricing arrangements and relationships. So if customers want to choose a lower premium, but have a limited network of hospitals, they can go for that,” Roy said, adding that the plans will be distributed primarily through agents and digital channels.
The company, which recently reported its Q4FY26 earnings saw its combined ratio improve to 95.7% from 98.4% the same quarter last year, while its retail health premium grew nearly 20%, a number lower than the industry’s growth of around 29%.
While Roy attributed it to base effect, he added that the company is also focusing now on quality, rather than quantity and is letting go of market share in certain markets like some parts of rural Maharashtra, Western UP and Gujarat where instances of frauds and customer grievance is very high. Instead, they are focusing on markets in the south like Telangana and Andhra Pradesh, where Roy says, the growth has been very healthy.
In FY26, the company settled claims worth Rs 1,254 crore covering 1.8 lakh claims in the region, 24% year-on-year increase, while the gross written premium in the two states grew 17% YoY to Rs 2,268 crore in FY26, while the number of policies increased from 8.8 lakh to 9.4 lakh.
At a company level, Star Health expects further improvement in its combined ratio, driven by tighter hospital pricing arrangements, better underwriting and fraud controls, as well as operating leverage from technology investments.
“The investments we are making in technology should reduce our operating expenses also significantly. No new hiring may be required to do all the automated services that so automatically scale benefits will play out. We also expect some improvement in the claim side because of the tighter pricing arrangements, new products and fraud management tools we have implemented,” he added.
Roy also said that at an industry level, efforts to address pricing and operational frictions are also underway at an industry level. The Insurance Regulatory and Development Authority of India (IRDAI), along with the Confederation of Indian Industry (CII), is facilitating discussions between insurers and hospital chains to standardise treatment protocols and reduce disputes, though any form of direct price regulation remains unlikely in the near term.
“Hospitals badmouth insurance companies, insurance companies badmouth hospitals. All of that has to stop. All we are asking is that upselling just because a customer has insurance should stop. This will increase the insurance prices and reduce the penetration,” Roy added.
The company also said upcoming regulatory changes on commissions are unlikely to materially impact its business, given its largely retail-driven distribution model and existing cost discipline.
