India's health insurance sector is experiencing a remarkable transformation as consumers increasingly opt for comprehensive coverage following the removal of GST on health insurance premiums. The policy change has catalyzed a significant shift in buying behavior, with Indians moving away from minimal coverage toward more robust protection.

Coverage Levels Surge Post-GST Relief

Data from PB Fintech 's Policybazaar platform reveals the substantial impact of GST removal on health insurance adoption. The average health insurance coverage has increased dramatically, demonstrating consumers' willingness to invest in better protection when cost barriers are reduced.

Shift Away from Low-Value Policies

The most significant change has been the decisive move away from inadequate coverage levels. Policies with sums insured below ₹10.00 lakh have experienced substantial decline, reflecting consumers' growing awareness of medical inflation and rising healthcare costs.

Multi-Year Policies Gain Momentum

Consumers are increasingly committing to longer-term coverage, seeking to avoid future premium increases and reduce renewal complexities. This trend indicates a more strategic approach to health insurance planning.

• Four-year policy tenures: +56% growth
• Five-year policy tenures: +62% growth

Unlimited Coverage Plans See Rapid Adoption

Perhaps the most striking development is the surge in unlimited health insurance plans. These comprehensive policies, which eliminate traditional sum-insured caps, have transformed from niche products to mainstream options.

Geographic Expansion Beyond Metros

The health insurance adoption trend extends beyond major urban centers, with smaller cities driving significant growth. Tier-3 cities now represent a substantial portion of health insurance purchases, indicating widespread awareness and acceptance.

This geographic expansion suggests that health insurance awareness and adoption are becoming more democratized across India's diverse urban landscape. The combination of GST relief and increased health consciousness has created favorable conditions for comprehensive insurance coverage to flourish beyond traditional metropolitan markets.

India's health insurance market in 2025 witnessed a tale of two trends: metropolitan cities leading in absolute bookings while smaller towns drove the majority of growth, according to new data from PB Fintech 's year-end report through its Policybazaar platform.

Metropolitan Cities Lead Booking Volumes

Delhi and Bengaluru emerged as the top performers in health insurance bookings for 2025, establishing themselves as key markets for insurance adoption. The metropolitan cluster was completed by Hyderabad, Pune, and Mumbai, which also ranked among the leading contributors to overall booking volumes.

Tier-3 Cities Drive Market Transformation

The most significant development was the surge in Tier-3 city adoption, which accounted for 70% of all health insurance purchases in 2025, representing a substantial increase from 63.5% in the previous year. This shift reflects changing attitudes in smaller towns, where families increasingly view health insurance as a mainstream financial product rather than an optional add-on.

Tier-2 cities showed modest growth, rising from 13.8% to 14.3% of total purchases. In contrast, Tier-1 cities experienced a notable decline, dropping from 22.7% to 15.7% of the market share, indicating a democratization of health insurance adoption across India's urban landscape.

Claims Pattern Reveals Health Priorities

The report identified key health concerns driving insurance claims across the country:

• Heart-related conditions
• Cancer treatments
• Cataract procedures
• Infectious and seasonal illnesses
• Day-care medical procedures
• Accidental injuries

Motor Insurance and International Segments Show Growth

In the motor insurance segment for FY26, Maharashtra topped demand charts, followed by Uttar Pradesh and Delhi. The overseas health insurance segment demonstrated remarkable growth, with NRI bookings from the US and Canada surging 157% year-on-year. European customers also contributed significantly to this growth, as expatriate families sought India-linked protection and continuity of care.

Travel Insurance Trends

Germany emerged as the top destination driving travel insurance purchases in 2025, followed closely by Thailand. This pattern reflects a combination of Schengen visa requirements and high-volume leisure travel to Southeast Asian destinations. Travelers showed preference for higher coverage amounts for US and Canada destinations, acknowledging the significantly higher healthcare costs in these countries.

The comprehensive data underscores the evolving nature of India's insurance market, with traditional metropolitan dominance giving way to broader geographic adoption while maintaining strong growth in specialized segments including international coverage.