The future of health insurance in India’s emerging cities: Unlocking growth

As Warren Buffett once said, “Risk comes from not knowing what you're doing.” This wisdom holds especially true in healthcare, where the lack of financial preparedness can turn a medical emergency into a financial crisis.

The health insurance sector in India is on the cusp of transformative growth, signalling its critical role in safeguarding families against mounting healthcare costs. According to GlobalData, the health insurance industry in India is expected to grow at a compound annual growth rate (CAGR) of 12.8%, increasing from $15.1b in 2024 to $23.8b by 2028. The share of health insurance in the Indian insurance market grew from 6.9% in 2019 to 9.5% in 2023, with a projection to reach 11.0% by 2028.

But what’s fueling this surge in adoption, particularly in India’s emerging cities? Is it the escalating cost of healthcare, the digital revolution making insurance more accessible, or a fundamental shift in consumer mindset? And as demand rises, can the industry keep up with the evolving needs of a diverse and rapidly growing population? Let’s break it down.

Rising healthcare costs and the necessity of health insurance in emerging cities

Healthcare in India is evolving rapidly, but with innovation comes expense. Advanced treatments, cutting-edge medical technologies, and inflation have pushed healthcare costs to unprecedented levels, making out-of-pocket expenses a daunting task for families. In the absence of health insurance, a single medical emergency can deplete savings built over decades. The positive growth projections for health insurance in India reflect its necessity. As the health insurance sector grows, more families are realizing that insurance isn’t just about protection — it’s about empowerment. It offers a safeguard against skyrocketing expenses while ensuring access to quality healthcare. This is particularly crucial in Y and Z cities, where access to specialized medical care may be limited, making financial preparedness even more essential.

Shift toward preventive and comprehensive coverage

In 2025, insurers are redefining the meaning of health insurance by focusing on preventive care. Policies now encompass features like wellness programs, free health check-ups, and chronic disease management. These benefits aim to reduce the financial strain of long-term illnesses and encourage healthier lifestyles, addressing health problems before they escalate. According to the Economic Survey 2023-24, health insurance premiums accounted for approximately 35% of the total written premiums in FY23 and are estimated to have grown by a significant 11%. The sector saw the fastest growth amongst all nonlife lines in FY23. It’s a shift towards comprehensive well-being, where families see health insurance as an ally in their pursuit of a healthier future. In emerging cities (Y, Z), digital health platforms and telemedicine services are playing a key role in enabling access to preventive care, making health insurance more than just a financial safety net.

Growth of health insurance penetration in Y and Z cities

Y, and Z cities are driving the next wave of growth, spurred by government initiatives and private-sector efforts. Programs like Ayushman Bharat have brought affordable coverage to underinsured areas, making quality healthcare accessible to millions. Tailored, low-cost plans for families in Y, and Z cities are bridging the gap, in turn, ensuring equitable access to financial protection against medical emergencies. Additionally, the rise of digital insurance platforms and AI-driven claim processing is making it easier for residents in these cities to purchase and manage policies, overcoming traditional barriers like paperwork and physical documentation.
Tax benefits and financial security

Health insurance isn’t just a tool for health protection, rather it’s a smart financial strategy. Under Section 80D of the Income Tax Act, policyholders can claim deductions on premiums, encouraging more families to invest in their health. The dual benefits of tax savings and long-term financial stability make health insurance important. By providing coverage for unforeseen emergencies and incentivising responsible financial planning, it ensures that families are prepared for life’s uncertainties without compromising their peace of mind.

A healthier and more secure tomorrow for India’s smaller towns

Health insurance in 2025 empowers Indian families with financial security and access to better healthcare, making it an important investment for a healthier future. In Y, and Z cities, where healthcare access continues to evolve, expanding insurance coverage and affordability will be key to bridging gaps and ensuring equitable healthcare for all. As adoption rises, the industry must continue innovating to meet the diverse needs of India’s growing population.


(This article is authored by Rakesh Kaul, Chief Business Officer, SBI General Insurance. All views expressed are personal.)