Growth of health insurance sector enabling healthcare access across India

Not so long ago, health insurance was seen as rudimentary policies that were printed on piles of papers, but things have changed. From asking ‘how to buy medical insurance’ to being able to claim coverage as needed, the Indian population has come a long way.

Today, comprehensive health insurance plans offer extensive coverage, preventive care, and comfort – and are available on digital platforms. This evolution showcases more than just advancements in the insurance sector; it reveals India’s shifting healthcare scenario, innovative launches by health insurance companies, and socio-economic progress.

Life insurance was introduced during British rule, with the establishment of the Oriental Life Insurance Company in 1818. However, the concept of health insurance was still foreign at that time. Primarily, healthcare was limited to charitable dispensaries and state-led hospitals—and focused on collective health services rather than individual coverage options. The common man relied on out-of-pocket expenses and had to seek healthcare access in urban areas.

Key developments

India’s health insurance market has seen several breakthroughs over the last few decades, spanning schemes and a shift in consumer perspective. Here below are some of the pivotal movements:

The launch of Employees’ State Insurance (ESI) Scheme

The launch of the Employees’ State Insurance Scheme (ESI) Scheme in 1952 was India’s first monumental move towards health insurance. Created to provide industrial workers with social and medical security, the scheme included an array of offerings, such as medical expenses, maternity benefits, and even funeral costs. While it was only accessible to the formal sector, ESI laid the foundation for public health initiatives in the future.

Mediclaim—The new wave

Mediclaim was introduced by General Insurance Corporation (GIC) in 1986. This marked the first-ever comprehensive health insurance plan for individuals. Mediclaim offered indemnity-based coverage, reimbursing hospitalisation costs under the four subsidiaries of GIC:

• New India Assurance
• National Insurance
• Oriental Insurance
• United India Insurance

This emerged to be a game-changer, specifically for the middle class. However, the adoption of Mediclaim was still slow, owing to lack of awareness and limited outreach.

The rise and limitation of health insurance plans

Health insurance plans faced numerous roadblocks, including:

• Lack of penetration: Quite a small segment of the urban, middle-class population availed health insurance.
• Limited variety of products: The health insurance plans were basic, and primarily offered hospitalisation coverage.
• Manual (and lengthy) processes: Manual health insurance claim processes were extremely cumbersome, often leading to inefficiency and delays.

IRDAI: The plot twist

The launch of the Insurance Regulatory and Development Authority of India (IRDAI) in 1999 was a turning point for health insurance in India. The regulatory body paved new ways for private insurers, offering a competitive space that inspired innovation—in terms of services and awareness. Several health insurance companies joined the rally, introducing a whole new wave of new products.

The key objectives of IRDAI were to:

• Promote fairness
• Improve customer satisfaction
• Enhance financial security
• Ensure transparent and orderly processes

Health insurance at present

India’s health insurance market is set to grow from Rs 1.3 trillion in 2024 to Rs 2 trillion by 2028. Here’s a walkthrough of the present scenario in the sector:

More options, more flexibility

Today, the health insurance landscape in India is diverse and robust with numerous health insurance companies offering a wide range of products and services. These include:

• Broader coverage options: The insurance market caters to larger segments, offering options ranging from individual and family floater plans with many new-age features, catering to large segments of society.
• OPD and daycare coverage: Modern health insurance plans include daycare procedures, outpatient treatments, and even alternative therapies, such as homeopathy and Ayurveda.
• Corporate and group insurance: Companies offer group health insurance plans to their employees, promoting workforce well-being.

The challenges

While health insurance in India has seen tremendous growth over the past few decades, the market still has challenges that need to be addressed.

• Low penetration rate: Despite its growth, the penetration of health insurance remains low in India. This is largely due to affordability and awareness barriers, especially in rural areas.
• Complex jargon: Misunderstandings about policy terms, health insurance claim processes, and exclusions—especially in their complexities—often lead to distrust and underutilisation.
• Healthcare inflation: Rising medical costs also make it important for insurance providers to maintain a balance between premium affordability and comprehensive coverage.

The evolution of medical insurance policies in India paints the picture of the country’s socio-economic transformation. From coverage options outgrowing limitations to health insurance documents going digital—these tools now secure millions against health-related medical ‘shocks’.

As the industry continues to expand, the future of medical insurance policies is expected to traverse technology integration, inclusivity, and a commitment to preventive care—reinforcing a sense of security among the larger population.