The removal of GST on health and term insurance was an important catalyst in how consumers upgrade coverage, choose smarter products, and commit to longer-term protection.
As 2025 comes to a close, India’s health insurance market looks very different from what it was even a year ago. The year marked a decisive shift in how Indian households evaluate healthcare risk, driven by rising medical costs, deeper product innovation, and a regulatory environment that encouraged consumers to seek better protection.
The removal of GST on health and term insurance was an important catalyst in how consumers upgrade coverage, choose smarter products, and commit to longer-term protection.
As 2025 comes to a close, India’s health insurance market looks very different from what it was even a year ago. The year marked a decisive shift in how Indian households evaluate healthcare risk, driven by rising medical costs, deeper product innovation, and a regulatory environment that encouraged consumers to seek better protection.
As 2025 comes to a close, India's health insurance market looks very different from what it was even a year ago. The year marked a decisive shift in how Indian households evaluate healthcare risk, driven by rising medical costs, deeper product innovation, and a regulatory environment that encouraged consumers to seek better protection.
The removal of goods and services tax (GST) on health and term insurance was an important catalyst in how consumers upgrade coverage, choose smarter products, and commit to longer-term protection.
Lower effective premiums opened the door, but it was growing awareness around medical inflation that pushed buyers through it.
As per Policybazaar survey of its customers in 2025, average health cover (sum insured) rose sharply through the year, moving from ₹14.5 lakh in the pre-GST phase to nearly ₹19 lakh post the reform. This increase reflected a deliberate reassessment of adequacy rather than incremental upgrades.
Bigger covers replace minimum protection
For years, health covers priced below ₹10 lakh have dominated new purchases, largely due to price sensitivity and a limited understanding of hospital costs. That pattern changed meaningfully in 2025.
Policies with sum insured below ₹10 lakh saw a clear decline, while demand shifted decisively toward ₹10 to ₹25 lakh covers. Even higher slabs gained traction, with covers of ₹25 lakh and above recording some of the fastest growth during the year.
This movement up the cover ladder indicates that consumers are no longer buying insurance just to meet a perceived minimum. They are factoring in the cost of surgeries, critical care, longer hospital stays and post-treatment expenses. The willingness to pay for higher protection reflects a growing alignment between insurance choices and real healthcare economics.
Product innovation expands consumer choice
Alongside higher covers, 2025 stood out for how health insurance products themselves evolved. Health plans offering unlimited coverage, once seen as unnecessary, moved into the mainstream as buyers recognized the limitations of fixed caps in an era of advanced medical care.
Unlimited sum insured, at an incremental cost of around 20% over a 10 lakh sum insured, provides total peace of mind in case of any kind of hospitalization event.
The growing acceptance of these plans signals rising trust in product design and claims settlement processes. Consumers showed greater confidence in choosing comprehensive options, especially when supported by digital comparisons that simplified decision-making.
Longer tenures reflect long-term thinking
Another defining feature of 2025 was the strong shift toward multi-year policies. Buyers increasingly opted for four-year and five-year tenures, signalling a departure from short-term, annual purchasing habits. Longer tenures offered premium stability and continuity benefits, but more importantly, they reduced the uncertainty associated with frequent renewals.
This trend reflects a broader shift in mindset. Health insurance is now being viewed as a long-term financial safeguard rather than a yearly obligation. Families are locking in coverage early and planning ahead, particularly for ageing parents and future healthcare needs.
Younger buyers and smaller cities drive growth
The demographic and geographic spread of health insurance adoption widened further in 2025. Younger adults between the ages of 18 and 35 accounted for a significant share of purchases, followed closely by those in the 35- to 45-year-old age group. Early entry into the insurance ecosystem is allowing these buyers to opt for higher covers and better benefits at more sustainable premiums.
At the same time, tier 3 cities emerged as the strongest growth drivers, increasing their share of overall purchases significantly through the year. Improved digital access, greater awareness of medical costs and better availability of tailored products contributed to this expansion. While metros like Delhi and Bengaluru continued to lead in absolute volumes, growth momentum clearly shifted beyond tier-1 markets.
Claims experience shapes smarter choices
Claims data from 2025 offers important context to these trends. Heart-related conditions, cancer and cataract remained among the most common claim triggers, alongside seasonal illnesses, day-care procedures and accidental injuries. These patterns reinforce why broader coverage and flexible benefits are becoming essential.
Add-on features, such as Day 1 coverage, renewal bonuses, and OPD riders, also saw higher adoption, reflecting a preference for policies that address both planned and unplanned healthcare needs.
The rise in NRI purchases, particularly from North America, Europe and the GCC, further highlighted the demand for dependable, comprehensive coverage for families in India.
As India steps into 2026, the evolution seen in 2025 signals a maturing market. Policy reforms played their role, but it was informed consumers led by a sharper understanding of healthcare risks that truly reshaped buying behaviour. Health insurance is no longer being chosen reluctantly. It is being selected with clarity, confidence and long-term intent.
Siddharth Singhal, business head, health insurance, Policybazaar.com.