Double-digit medical inflation has long been cited by insurance companies as the primary justification for hiking health insurance premiums, but the Insurance Regulatory and Development Authority of India (IRDAI) has maintained that there is insufficient evidence to establish a direct correlation between the two.
IRDAI says no direct link proven between medical inflation and health insurance premium hikes – The HinduBusinessLine
No specific IRDAI study on medical inflation link
“IRDAI has informed that no specific study has been conducted by it on the rate of medical inflation and its correlation with health insurance premium,” Minister of State in the Ministry of Finance, Pankaj Chaudhary, said in a written reply. This admission undermines the narrative of insurance companies, which have frequently cited double-digit healthcare inflation to explain why premiums have surged by over 100 per cent in certain cases within just three to four years of the Covid-19 pandemic.
Chaudhary noted that several factors beyond medical inflation, including the rising average age of policyholders, higher sum insured, and modified policy features, drive annual premium hikes. “Since multiple reasons contribute to increase in individual premiums, the increase attributable to only medical inflation cannot be identified,” he said.
IRDAI stresses actuarial oversight and transparency
He also highlighted IRDAI’s push for transparency via mandatory actuarial oversight. The Appointed Actuary of the insurer is made responsible for the periodical review of the products. He/she shall ensure that any revision either of the premium rates or the corresponding benefits or both with respect to the existing products shall be based on credible underlying experience of relevant risk parameters. The revision shall also consider the analysis of policyholders’ grievances and market feedback, if any,” he said.
IRDAI has capped a 10 per cent premium hike for senior citizens by all general and health insurers. Also, if the increase in the premium for senior citizens exceeds 10 per cent per annum, or if individual health insurance products offered to senior citizens are withdrawn, then insurers shall undertake prior consultation with the IRDAI, Chaudhary said.
Insurers cite rising healthcare costs
Insurance companies define medical inflation as the increase in health care costs. These expenses include the cost of medicines, diagnostic tests, doctors’ fees, and hospitalisation charges. The type of treatment and procedure might also be considered under the definition of medical inflation. Companies say medical insurance has been 12-14 per cent, much higher than general inflation. Last month, Anand Roy, MD & CEO at Star Health Insurance, said that around 65 per cent of the company’s products saw price hikes last year owing to healthcare inflation.
Published on March 16, 2026
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