Mumbai: More than half of young Indians aged 24 to 34 who buy health insurance drop out within the first three years, highlighting a structural weakness in policy retention.According to a Niva Bupa Health Insurance survey, 55% of policyholders in the age group do so within three years of purchase, indicating that early adoption is often temporary and lacks a long-term commitment. This high churn shows that purchasing decisions are often driven by short-term triggers rather than an ongoing sense of risk protection.Health insurance premiums rise 9.12% to Rs 1.17 lakh crore in FY25; However, the number of lives covered increased by only 1.36% to 58 crore.“What’s even more telling is that most of them are not switching from one insurer to another. They are actually leaving the category altogether,” said Nimish Agarwal of Niva Bupa.Affordability has been cited as the biggest reason for lapse and 46% of people have stopped citing it as the reason. The pressure is compounded by competing financial obligations: 66% of defaulters had active loans, including 33% personal loans and 17% home loans. In such cases, insurance premiums are one of the first expenses to be cut when budgets are tight. Unlike life insurance policies, which are purchased for a level premium, health insurance policies are annual contracts and prices increase over time. For insurers, it is important to involve young people to spread the risk and keep the business viable as claims increase with age.“The biggest obvious reason is affordability. But when you double-click on it, it’s really about value. They are paying a premium of around Rs 20,000-25,000 every year, and because they have not claimed or used the policy, they do not see enough value in continuing with it. So it becomes the first thing to quit,” Agarwal said.A large portion of young policyholders turn away because they do not realize the value in the product. About 34% discontinued their policies because they believed they and their families were healthy, and they considered the insurance unnecessary in the absence of an immediate need. “This group is very different in the way they evaluate expenses. If they’re using something – like a smartphone or a subscription – they’re happy to continue paying for it. But health insurance is something they can’t access for two or three years, and that creates an isolation. So a big question for us internally is: How do we make health insurance more ‘experiential’ and not just something that comes in handy when you get sick?” Aggarwal said.This assumption provides widespread preference for return generating instruments. About 31% of lapsers said they would prefer to invest in products that offer visible returns, reflecting a tendency to view insurance premiums as a sunk cost unless a claim is made. Another key finding was that while young people considered themselves to be healthy, in-depth questions on check-ups, lifestyle or medical parameters showed their confidence falling.There are also signs of product-related dissatisfaction. About 17% cited limited disease coverage as a reason for dropping out, suggesting that lack of understanding or unmet expectations about coverage contribute to early drop-off. Interestingly, in tier-3 markets, interest in health insurance is actually higher – up to 70% – as it is seen as a gateway to quality health care. But ownership is low because distribution is weak and network effects are missing.And finally, on delivery, one thing stood out very clearly: digital creates awareness, but purchases still happen through human interaction. Even younger consumers want to talk to someone before making a purchase. “So for us, this has an impact on how we build last-mile delivery, especially beyond the top cities,” he said.
