India’s health insurance industry is booming. Policies are being pushed aggressively, premiums are climbing every year, and insurers claim to be covering more Indians than ever before. But beneath the marketing gloss lies a troubling question: Are these premiums really funding care—or just fuelling commissions and corporate overhead?

At its core, health insurance is meant to be simple. Many pay a little, so a few don’t have to pay a lot. Insurers collect premiums from a large pool of people and use those funds to cover the medical expenses of those who fall ill. Healthy policyholders subsidise the sick, knowing that one day the roles may be reversed. It’s a system built on mutual protection.

But in India, this promise is breaking down.

The efficiency of any insurance system is measured by its Medical Loss Ratio (MLR) — the percentage of premiums actually spent on patient claims. The remainder is absorbed by commissions, administration, and management overhead. And here is where the numbers start to look ugly.

An analysis of FY2025 financial disclosures of Standalone Health Insurance Companies shows just how distorted the system has become:

Premium Collected (net) Claims incurred Medical Loss Ratio (MLR) % to PremiumCommission as % to premiumManagement Expenses as % to premiumStar Health Insurance14,822.210,419.470%15%17%Care Health Insurance 5,328.7 3,074.358%20%22%Niva Bupa4,894.52,996.561%22%22%Manipal Cigna 1,459.2 930.764%24%28%
Source : Financial Statements

The data reveals a systemic imbalance: 15–24% of premiums go to commissions, another 17–28% to management expenses, while as low as 58 per cent (as in case of Care Health Insurance) is directed toward medical care—the very purpose of health insurance. MLR will drop further down to 54%, once the income on investments are added to Premium Collected.

Compare this with global benchmarks:

In the U.S., regulators mandate that at least 80- 85% of premiums must go toward patient care. In Germany, France, and the Netherlands, administrative and sales costs are capped at 10%, ensuring the bulk of contributions flow to treatment.

India’s model, by contrast, is veering dangerously toward inefficiency. Premiums rise every year—often by 10–15%—but trust in insurers keeps falling. Customers pay more, hospitals are squeezed, and patients still find themselves battling for approvals or forced to pay out of pocket. It is little wonder that trust in health insurers is eroding.

The uncomfortable truth is India’s health insurance industry is behaving less like a safety net and more like an inefficient sales machine. Growth is measured not in how much care is funded, but in how many policies are sold. That is not insurance but it is marketing masquerading as protection.

If India wants health insurance to be meaningful, not just profitable, two things must happen:

Regulators must set MLR thresholds — forcing insurers to spend at least 80–85% of premiums on patient care.
Costs of customer acquisitions are reduced to single digit
Cap management and administrative expenses — health insurance must fund healthcare, not corporate luxuries.
India’s health insurance industry needs to shift its focus from aggressively selling policies to transparently funding care. Unless efficiency improves and regulations enforce higher MLR thresholds, the promise of health insurance will remain hollow—leaving both patients and hospitals short-changed.

It’s time for health insurance in India to grow up—by moving from selling policies to truly funding care.

The article is written by Dr. Girdhar Gyani, Director General at Association of Healthcare Providers (India)
(DISCLAIMER: The views expressed are solely of the author and ETHealthworld.com does not necessarily subscribe to it. ETHealthworld.com shall not be responsible for any damage caused to any person/organisation directly or indirectly)

Published On Aug 29, 2025 at 01:21 PM IST

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