Health Insurance Premium to Rise Due to Increasing Air Pollution?

With the Air Quality Index (AQI) readings between “severe” and “hazardous”, the air quality in Delhi is worse than any major city in the world. The capital territory of India is witnessing this unpleasant situation along with a few other metros. The increased levels of air pollution is hazardous for health, especially for those already suffering from respiratory diseases. It may even lead to hospitalisation in some cases. And the situation only worsens in case of light rains.

But as the depleting air quality damages one’s health, can it have any impact on health insurance premiums?

It has been witnessed that already a few insurers charge a slightly higher premium rates in Delhi-NCR and few regions in north India, as the loss ratio in these regions are generally higher as compared to the rest of India.

However, the reason for this difference is the difference in lifestyle, including eating habits or fitness, when it comes to north India. Expensive medical facilities in Delhi-NCR region is another reason why they are charged higher premiums compared to other metros.

The Head of Retail Underwriting at Bajaj Allianz General Insurance Co. Ltd., Gurdeep Singh Batra shares, “Pollution has been around for long but this is a spike that prevails for a month or so and should pass soon. I don’t think it’ll have a bearing on premiums anytime soon."

Alterations in the health insurance premium is not a simple task. It demands regulatory approvals and duration of 6 months for the entire process that includes an insurance company filing for a change in premium to premiums actually reflecting on the price chart.

The insurers share that premiums differ with different zones. They are majorly based on hospitalisation expenses, which are comparatively higher in metro than in tier II and III cities. Zones are segregated on the basis of city type or North, East, South, or West. For instance, if you are a 40-year-old resident of Delhi, falling under Tier I, your premium will be around Rs. 12,540 for sum insured of Rs. 10 Lakh. However, if you are a resident of Dehradun falling under Tier II, then you will have to pay a premium of Rs. 10,450 approximately of the same amount of sum insured.

Seeing the current situation, it has been assumed that if the underwriting becomes more complicated and there is a rise in the incident of claims in Delhi-NCR, then the premiums might increase in future. But for now, there has been no proper data available as to claim numbers due to increased pollution. There has definitely been rise in hospitalisation due to air pollution but definitely not much difference in claim numbers.

Also, it is for sure that the chances of undergoing a surgery for someone suffering from respiratory ailments are low as compared to someone who is suffering from cancer, heart diseases. Thus, the long-term effects of air pollution on health can only be seen after five to seven years and then the insurers might consider the rise in premiums.

At present, if the situation persists in Delhi-NCR, then the insurers may launch specific insurance products. Gurdeep Singh Batra suggested that the insurance companies can come up with bite-sized policies similar to the ones available for vector-borne diseases including chikungunya and malaria. These plans are typically available at low premium.

While the offerings of sachet policies like these are still unclear, the insurers share that they will primarily target people with respiratory disorders who are at higher risk of getting hospitalised when pollution levels shoot.

The impression is that the insurers are not taking pollution as a cause for a rise in claims as yet and hence the premiums may not be increased immediately. But if the pollution continues to get worse, then it may see some change in health insurance premiums.