The financial protection gap for critical illnesses is widening, even as employers and insurers step up preventive care efforts and introduce cost-sharing measures to help manage rising treatment costs, according to a report released by Aon.
The report noted that employers in India are increasingly investing in preventive care, outpatient benefits, and digital health and wellness solutions, reflecting a broader shift toward proactive health management. It added that companies are also recalibrating plan structures by introducing cost-sharing mechanisms such as voluntary top-ups, co-pay models and employee-funded riders.
The report highlighted that India’s protection gap remains significantly higher than global peers, pointing to substantial growth potential for the insurance industry.
While employer-provided health insurance is widely available, coverage is typically limited to inpatient care, with average sums insured of INR300,000–500,000 ($3,600-6,000).
Critical illness riders, where offered, are usually capped at INR500,000 to 1m—levels that are often insufficient for serious conditions requiring prolonged treatment and recovery.
The report also underscored a widening mismatch between the actual cost of critical illnesses and the level of financial protection available to individuals and families.
The critical illness protection gap refers to the shortfall between the true financial impact of a serious illness and the level of protection available through insurance, employer benefits and personal savings.
Globally, this gap is widening—particularly in high-growth regions such as APAC, the Middle East and Africa, and Latin America—where medical inflation continues to outpace wage growth and the expansion of benefits.
In India, healthcare inflation, estimated at around 11.5%, poses a significant challenge for employer-sponsored health plans in delivering adequate coverage.
The report called for a more holistic approach to address the issue, integrating insurance design, employer benefits, and individual financial planning to help bridge the gap.