Health and life insurance are essential aspects of financial planning. Without sufficient coverage, medical bills or debts after one’s passing can burden family members, affecting their lifestyle. Life insurance is particularly crucial for those with dependents, as the absence of financial protection can leave them vulnerable. However, despite its importance, many Indians remain uninsured due to factors like high premiums, complex policies, and frequent changes by insurers.
Recent trends show that underwriting rules have become much tougher in India. This has led to a rise in policy rejections. Insurers have tightened their risk assessment processes, making it harder for applicants to secure coverage.
Nithin Kamath, Founder & CEO at Zerodha & Rainmatter, writes on his social media post, “The first thing you should do when you are starting your personal finance journey is to ensure you have sufficient life and health insurance. If you have dependents, not having life insurance is a bad idea. (However) based on my interactions with folks, perhaps the biggest reason why they don’t have life insurance is because the policies are a nightmare to understand with all sorts of jargon and hidden clauses. Then there’s the fact that insurers keep changing things. For example, I didn’t know underwriting rules had become much tougher and rejections had gone up.”
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In India, insurance underwriting rules involve a detailed evaluation of an applicant’s health, lifestyle, occupation, and financial details to assess their risk profile before issuing a policy. Factors such as age, medical history, smoking habits, family medical history, and income are carefully analysed to determine appropriate premiums and coverage levels. Insurers must also adhere to guidelines set by the Insurance Regulatory and Development Authority of India (IRDAI).
Industry experts say this shift began after the COVID-19 pandemic. Insurers faced higher claims, which forced them to re-evaluate their underwriting strategies. Medical tests have become more detailed. Any pre-existing health conditions, even minor ones, can lead to higher premiums or outright rejection.
Applicants are often caught off guard by these changes. The insurers cite health issues and many people don’t even know they have it.
Another problem is the complexity of insurance policies. The use of jargon and hidden clauses confuses many people. Terms like riders, exclusions, and waiting period make it difficult to understand what’s covered and what’s not.
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