The landscape of health insurance in India underwent a significant transformation in 2025, marked by consumers opting for substantially higher protection and smarter products. A decisive shift in how households perceive healthcare risk was driven by rising medical costs, product innovation, and supportive regulatory changes.
GST Removal Fuels a Leap in Coverage
A key catalyst for change was the removal of the Goods and Services Tax (GST) on health and term insurance. This reform, which lowered the effective premium cost, acted as a gateway for consumers to reassess their needs. However, the primary driver was a heightened awareness of relentless medical inflation.
Data from a Policybazaar survey of its customers in 2025 illustrates this shift dramatically. The average health cover, or sum insured, rose sharply from approximately ₹14.5 lakh in the pre-GST period to nearly ₹19 lakh after the reform. This was not a minor upgrade but a deliberate move by buyers to secure adequate financial safety nets against modern healthcare expenses.
Key Trends That Redefined the Market
The year witnessed several defining trends that point towards a more mature insurance market.
Moving Beyond Minimum Protection
For years, policies under ₹10 lakh dominated new purchases. This pattern changed meaningfully in 2025. Demand decisively shifted towards covers in the ₹10 to ₹25 lakh range, while policies below ₹10 lakh saw a clear decline. The fastest growth was recorded in the slab of ₹25 lakh and above. Consumers are now factoring in the full cost of critical surgeries, extended hospital stays, and post-treatment care, aligning their insurance choices with real-world medical economics.
The Rise of Unlimited and Long-Term Plans
Product innovation expanded consumer choice. Health plans offering unlimited sum insured moved into the mainstream, offering peace of mind for a marginal extra cost over a basic ₹10 lakh policy. This signals growing trust in insurers' claim settlement processes.
Equally important was the strong shift towards multi-year policies of four and five-year tenures. This move away from annual renewals indicates health insurance is now viewed as a long-term financial safeguard, providing premium stability and reducing renewal uncertainty.
New Demographics and Geographies Drive Growth
The adoption base widened considerably. Younger adults aged 18-35 were significant purchasers, allowing them to lock in better benefits at lower premiums. Geographically, while metros like Delhi and Bengaluru led in volume, Tier 3 cities emerged as the strongest growth drivers. Improved digital access and awareness fueled this expansion beyond major urban centers.
Claims Data Informs Smarter Choices
The evolving buyer behaviour is backed by claims experience. Conditions like heart disease, cancer, and cataracts remained among the top claim triggers, alongside day-care procedures and accidents. This reality reinforced the demand for broader coverage and popular add-ons like Day 1 coverage, renewal bonuses, and OPD riders. The year also saw a notable rise in NRI purchases from North America, Europe, and the GCC, highlighting demand for dependable coverage for families back in India.
As India steps into 2026, the market evolution of 2025 sets a new standard. Regulatory reforms provided the initial push, but it was the informed consumer, armed with a sharper understanding of healthcare risks, that truly reshaped behaviour. Health insurance is no longer a reluctant purchase but a confident selection made with clarity and long-term intent.
Insights contributed by Siddharth Singhal, Business Head, Health Insurance, Policybazaar.com.
