Hey folks, Pratham here.
Welcome back to Paradox Weekly, a Masters' Union newsletter, where we break down the ideas, trends, and contradictions shaping business today.
the last time something happened to your car, what did you do?
Indians paid over ₹3 lakh crore in non-life insurance premiums last year.
Every insurer, broker, financial advisor will tell you the same thing: you are underinsured and need more coverage.
I disagree with what insurance in India actually is.
India's out-of-pocket health expenditure is still around 40% of total health spending, down from 62% a decade ago but still among the highest of any major economy, despite millions of new policies being sold every year.
The country has more insurance than at any point in its history, and Indians are still funding most of their own healthcare directly.
That’s today’s paradox.
The answer is the No-Claim Bonus, and most people who have car insurance have no idea how expensive it actually is to protect.
The No-Claim Bonus on car insurance is standardised across every insurer in the country.
Five consecutive claim-free years earns you 50% off the Own Damage component of your premium, building from 20% after the first year, 25% after two, 35% after three, and 45% after four.
SBI General's consumer guide advises policyholders to absorb minor repair costs themselves and protect their NCB.
These are insurance companies officially advising you not to use their product.
The industry's response to this is the NCB Protector add-on, which costs 5 to 10% of your OD premium and gives you the right to file one or two claims a year without losing the slab.
You pay extra to use the product you already paid for.
Every major retail health policy in India offers a Cumulative Bonus, an increase in sum insured for each claim-free year that is cancelled or reduced when you file.
Insurers can apply renewal premium loading on frequent claimants, classifying them as higher risk for having used the protection they purchased, and Care Insurance advises avoiding smaller treatment claims to keep the bonus and premiums stable.
The same logic that pushes car owners to pay for dents themselves pushes health policyholders to absorb medical expenses out of pocket, so the policy stays intact for something serious.
A LocalCircles survey of over 100,000 respondents found 4 in 10 had a health claim rejected or partially denied for reasons they considered invalid, and IRDAI's own FY24 data shows ₹26,000 crore in health claims were disallowed, a 19% jump from the year before.
The most profitable insurance customer in India is the one who renews every year and never claims.
The insurer wins on both sides of this.
When you don't claim, the NCB discount they give you next year costs them nothing because they have already collected the full premium this year.
When you do claim, the slab resets and your future business gets repriced at the higher rate.
India's non-life insurers posted ₹13,154 crore in profit in FY25, up from ₹10,119 crore the year before.
Every time you ran the NCB math and decided the damage was not worth claiming, that was the product working exactly as designed.
Hit reply: what is the highest repair bill you have paid out of pocket to protect your no claim bonus?
I read every email.
Until next week,
Pratham