At first glance, this appears to be a success story. Premiums are lower, enrolment is effortless, and coverage is seamlessly bundled with employment, loans or memberships.
But a deeper look raises an uncomfortable question: Is group insurance really a panacea for India’s health insurance problems?
The honest answer is—no.
The illusion of scale
Group and affinity health insurance products are structurally vulnerable. They are increasingly strained by rising healthcare costs, high fraud, adverse claim ratios and, most critically, a lack of perceived long-term value for the insured.
These plans thrive largely because they make premiums appear smaller and more “contextual”, particularly through embedded distribution models.
From a customer’s perspective, however, this convenience comes at a cost. Group policies are inherently short-term arrangements. They exist only as long as the group exists—or as long as the insurer finds the arrangement commercially attractive.
History shows that a significant share of such plans are discontinued, redesigned or sharply repriced. When that happens, customers are often left exposed precisely when they need coverage the most.
Health insurance, by its very nature, is meant to be long-term protection—not a temporary benefit.
What group cover cannot offer
Individual health insurance policies offer features that group insurance simply cannot replicate. Lifetime renewability is the most critical of these.
In contrast, group and affinity policies are transactional. Coverage exists only while one remains an employee, borrower or member of a specific group. The moment an individual exits that ecosystem—through job loss, retirement, loan closure or even a bank merger—the cover can disappear.
Many bank account holders learned this lesson the hard way when banks changed insurance partners or when public sector banks merged, abruptly discontinuing embedded insurance covers without adequate transition.
This is not an argument against group insurance. These products serve a purpose, particularly in the short term or as supplemental coverage. But when dealing with long-tenure risks such as hospitalization, skipping retail insurance is a strategic mistake. While the probability of a claim may be low in the first year, over a 10-year horizon it rises significantly.
The silent failure
One of the most problematic aspects of affinity and embedded insurance is the 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 are never filed, insurers enjoy windfall profitability, and intermediaries earn disproportionately high commissions. The economics of embedded insurance rest heavily on this silent non-utilization.
In terms of lives covered, group insurance has also begun to cannibalize retail health insurance, creating a false sense of security. Many consumers now believe personal insurance is unnecessary because “some cover already exists”.
Despite years of advocacy, retail health insurance penetration in India remains abysmally low. Ironically, it is often perceived as a “privileged product”, accessible only to those with awareness, disposable income or prior exposure to healthcare costs.
This phenomenon is not unique to India. Even in high-income economies such as the US—where per capita income is nearly ten times that of India—health insurance penetration is still driven largely through group mechanisms. This underscores that the challenge is not affordability alone, but behavioural inertia.
Cushion, not a crutch
Group and affinity health insurance plans are not inherently flawed. They play a vital role in expanding coverage, especially in a country where large sections of the population cannot yet afford comprehensive retail policies. But they are, at best, a cushion, not a crutch.
Health insurance is a long-term contract with uncertainty. When the risk horizon spans decades, relying solely on arrangements that can vanish overnight is imprudent. Group coverage should be viewed as supplementary, not substitutive.
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 the most.
Prof. Manoj K. Pandey, associate professor, BIMTECH
