The air quality in many Indian cities, particularly in the north, has become a significant concern, with cities like Delhi, Mumbai, and Kolkata consistently recording severe air quality indexes (AQI) throughout the year. This has led to an increase in pollution-linked illnesses, such as respiratory and cardiovascular diseases, which in turn is affecting the health insurance industry. Insurers are now reviewing city-based pricing, taking into account the pollution levels, lifestyle diseases, and rising treatment costs in metro cities.
According to Ajay Shah, Head of Distribution at Care Health Insurance, the connection between air quality and health risk can no longer be ignored. Prolonged exposure to poor air quality is accelerating chronic health conditions, particularly among children, seniors, and those with pre-existing vulnerabilities. This has led to a rise in claims, and insurers are now evaluating long-term health risk, disease progression, and care utilization patterns.
Industry data shows that people living in metro cities like Delhi, Mumbai, and Bengaluru already pay 10-20% more for health insurance plans compared to those in smaller cities. The premium gap is expected to widen due to higher hospitalization costs, larger private hospital networks, specialist fees, and faster medical inflation in metro regions. Pollution is now a significant factor in this gap, with doctors reporting more cases of asthma, COPD, and pollution-triggered cardiac stress in polluted cities.
In response, insurers are rethinking their approach to long-term health risk, moving from a reactive, illness-based model to a more prevention and management-led model. Environmental indicators like air quality are slowly entering actuarial models, and insurers may soon rely more heavily on public health data to classify cities and price premiums. This could lead to a closer linkage between public health data, insurance design, and consumer behavior.
However, there is a growing concern that heavily polluted cities may end up paying the highest premiums, despite residents having limited control over environmental conditions. Regulators will need to ensure transparency and fairness in pricing models, which will need to show clear evidence linking city-level pollution to rising claims. For consumers, this means that air pollution is no longer just an environmental problem, but also a factor in shaping long-term health patterns and influencing hospitalization trends. Prevention, regular health checks, and choosing plans with chronic care support may become more important as insurers adapt their pricing models.