Higher premiums on making claims: Experts raise concerns over health insurance accessibility

Some standalone health insurance firms have lately been advocating for a change known as 'cohort-based pricing'. The proposal aims to rein in claim costs and make health insurance more affordable. However, critics argue that it might be a covert attempt to resurrect the controversial claim-based loading system, a practice abolished in the past.

Cohort-based pricing is a strategy that shifts the focus from individual risk characteristics to group-based risk profiles.

In simpler terms, it proposes determining premiums based on the collective risk factors of a specific group or cohort.

Instead of setting premiums for each person based on their unique health factors, this approach groups individuals with similar risk factors and sets insurance prices for the entire group.

This departure from the conventional model aims to streamline costs and offer more affordable health insurance.

However, industry experts have been quick to draw parallels with the now-defunct claim-based loading system.

This proposed concept seems to introduce separate premium pricing for policyholders who make claims versus those who do not.

Critics argue that this could penalise individuals for utilising the health insurance they diligently pay for.

Under the cohort-based pricing model, the group or cohort that files claims in a particular year could witness a substantial increase in their premiums for a specified period.

This potentially alarming consequence has raised concerns about the affordability of health insurance for those who need it the most.

Adarsh Agarwal, Chief Distribution Officer at Digit General Insurance, expressed reservations about the discriminatory nature of the proposal.

He pointed out that this approach could disproportionately impact individuals with chronic illnesses or the elderly, who often require more frequent claims.

Agarwal emphasised that increasing premiums each time a claim is made could render health insurance impractical for such policyholders.

Insurers traditionally encourage individuals to purchase health insurance early in life, recognising the unpredictable nature of health events.

However, the cohort-based pricing proposal seems to challenge this idea by creating a divide between those who make claims and those who do not.

Agarwal argued that this concept undermines the fundamental purpose of health insurance.

"This appears to be a customer-unfriendly idea as it will lead to health insurance products being prohibitive for those who make claims. For example, the premium of a 60-year-old couple for a sum insured of ₹5 lakh would be ₹35,000-50,000, which is anyway on the higher side. On top of this, the insured is punished through premium hikes every time they make a claim, their health insurance premium over the years might reach ₹1-1.5 lakh for a cover of ₹5 lakh, which appears to be illogical," Agarwal told CNBC-TV18.com.

If implemented, individuals facing chronic illnesses or the elderly might witness a significant spike in premiums, potentially reaching unreasonable levels over the years.

The consequence could be the exclusion of these individuals from the protective umbrella of health insurance.