Beyond the Comfort of Groups: Why Individual Health Insurance Remains Essential
Health insurance, by its very nature, is designed to provide long-term protection—not merely a temporary benefit. In recent years, group and affinity health insurance products have been promoted as a straightforward solution to India's health insurance challenges. Employers, banks, fintech platforms, cooperatives, and government schemes have collectively extended coverage to millions of lives, creating an illusion of widespread security.
The Illusion of Scale and Its Hidden Risks
At first glance, group insurance appears to be a success story, with lower premiums, effortless enrollment, and seamless bundling with employment, loans, or memberships. However, a deeper examination reveals significant vulnerabilities. These products are increasingly strained by rising healthcare costs, high fraud rates, adverse claim ratios, and a critical lack of perceived long-term value for policyholders.
From a customer's perspective, the convenience of group policies comes at a substantial cost. These arrangements are inherently short-term, existing only as long as the group persists or the insurer finds the arrangement commercially viable. Historical data indicates that a significant portion of such plans are discontinued, redesigned, or sharply repriced, leaving individuals exposed precisely when they need coverage most.
What Group Coverage Cannot Offer
Individual health insurance policies provide features that group insurance simply cannot replicate. The most critical of these is lifetime renewability. In contrast, group and affinity policies are transactional, with coverage ceasing upon exit from the group—whether due to job loss, retirement, loan closure, or even bank mergers.
Many bank account holders have learned this lesson the hard way when banks changed insurance partners or public sector banks merged, abruptly discontinuing embedded insurance covers without adequate transition. This highlights the unreliability of group plans for long-term protection.
The Silent Failure of Embedded Insurance
One of the most problematic aspects of affinity and embedded insurance is the widespread lack of awareness among the insured. In many cases, especially with covers bundled with lending products, individuals are not even aware they are insured. As a result, claims go unfiled, insurers enjoy windfall profitability, and intermediaries earn disproportionately high commissions.
The economics of embedded insurance heavily rely on this silent non-utilization. Moreover, group insurance has begun to cannibalize retail health insurance, fostering a false sense of security. Many consumers now believe personal insurance is unnecessary because "some cover already exists," contributing to India's abysmally low retail health insurance penetration.
Group Insurance: A Cushion, Not a Crutch
Group and affinity health insurance plans are not inherently flawed; they play a vital role in expanding coverage, especially for populations that cannot yet afford comprehensive retail policies. However, they should be viewed as supplementary, not substitutive. Health insurance is a long-term contract with uncertainty, and relying solely on arrangements that can vanish overnight is imprudent.
For individuals who can afford it, an individual health insurance policy with lifetime renewability is indispensable. It offers continuity, transparency, and control—three attributes that group insurance can never guarantee. As healthcare costs continue to rise, the real question is not whether one is insured today, but whether that insurance will still be in place when it is needed most.
In summary, while group insurance serves a purpose in the short term or as supplemental coverage, it cannot replace the long-term security provided by individual health policies. Making informed decisions about insurance is crucial for true financial protection in an unpredictable healthcare landscape.
