How the Health Insurance Industry Can Offer Relevant Products for Millennials and Gen Z

In India, health insurance remains voluntary and the healthcare system is divided into public and private sectors, with free healthcare services available only in public sector facilities. Industry estimates reveal that the health insurance market is significantly under-tapped, with nearly 40 million people without health coverage. Lack of awareness, accessibility issues and limited reach are some of the major reasons for low health insurance penetration.

The Covid-19 pandemic has dramatically increased awareness of health risks and financial preparedness, increasing almost tenfold. Despite this growing awareness, a significant segment of the “missing middle” persists: people who recognize the importance of insurance but face barriers related to affordability and availability of relevant products.

This evolving landscape presents an exciting opportunity for private insurers to fill coverage gaps and expand their market reach. Moreover, with the workforce at nearly 56% as per the latest Annual Workforce Survey report, and largely comprised of millennials and Gen Z, there is a dire need for affordable, easily accessible and relevant health insurance solutions for young customers.

Challenges

One of the major challenges in the current market is the lack of visibility around the value proposition of health insurance, leaving many people unsure of its immediate necessity. Additionally, the cost of a quality healthcare system in India has increased significantly, making affordability one of the biggest barriers for customers when it comes to health insurance premiums. Traditional retail health insurance policies often come with high premiums, which is a challenge for many young professionals. These individuals are looking for health insurance solutions that are tailored to their financial capabilities and specific needs. They need policies that offer added value beyond basic hospitalization coverage, including benefits such as outpatient or OPD services, chronic disease management, and even wellness packages.

Big and small cities

The Indian health insurance market is evolving and new trends are emerging to cater to the diverse needs of young professionals. It is notable that tier 3 and 4 cities are exhibiting distinct trends as compared to metro areas, where healthcare costs are relatively low, with most customers opting for basic coverage that meets their immediate healthcare needs.

In Tier-I and Tier-2 cities, where healthcare costs are significantly higher, insurers are seeing a shift towards higher sum assured policies. Products offering features such as unlimited refund of sum assured and guaranteed bonuses are gaining popularity, reflecting a shift towards more flexible and comprehensive coverage options. With rising healthcare costs in metro cities and an increase in lifestyle diseases such as diabetes, hypertension and heart problems, customers are demanding coverage for disease management programmes and reduced waiting periods for pre-existing conditions.

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Some private insurers are focusing not only on covering the curative aspects of healthcare but also on the cost of disease management and prevention. This includes chronic disease management packages that cover preventive care, consultations and diagnostic tests. In addition, some of the major insurance companies have started offering products for people with early or borderline diabetes.

The expectations of young customers

Many insurance companies now offer coverage for office visits. In addition to the office visit functionality offered in the product, the user journey in terms of a seamless experience and no dependency on the insurer is something that this young customer base is inclined towards. These office visits often include coverage for consultations, diagnostic tests, dental care, vision care or teleconsultations. In addition, young customers appreciate wellness packages that include diet and nutrition management or disease management programs.

There is a significant gap between current market offerings and the expectations of millennials and millennials. For example, in India, one in six couples suffer from infertility and the cost of infertility treatments is very high, but very few insurance companies offer comprehensive coverage for infertility. Additionally, most insurers typically exclude coverage for sports injuries, despite the fact that customers under the age of 30 often participate in sports, adventure activities, and regular gym workouts. This segment specifically looks for health insurance that covers injuries related to physical activity or sports.

Millennials and Gen Z are looking for personalized, transparent, and accessible health insurance products online. They want tailored solutions that fit their lifestyle choices and health priorities, such as coverage for sports injuries, infertility treatments, and global health needs. It’s clear that more needs to be done to meet the specific needs of this large segment.

Conclusion

As the health insurance market evolves, bridging the gap between affordability and comprehensive coverage remains a critical challenge. Insurers need to innovate and adapt their offerings to better meet the needs of young Indian professionals. This includes expanding coverage options, improving affordability, improving accessibility through digital platforms, and ensuring transparency of product features. According to the IMF (International Monetary Fund) projections, India is on track to overtake Japan to become the world’s fourth-largest economy by the end of 2025. However, the Indian health insurance industry needs to catch up and grow even faster to meet the evolving needs of ‘young’ India to reap the demographic dividend.

Dr Santosh Puri is Senior Vice President, Healthcare Products and Processes at Tata AIG General Insurance

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