Bad Air, Bad Business! Why Insurers Need To Wake Up To Pollution-Linked Profit Risks

The strange thing this season is that the government is ducking behind shifted goalposts, sounding somewhat helpless.

The big question: Who will bell the cat called to raise the pitch so that long-term solutions emerge from the woodwork of short-term bans on polluting vehicles, construction activity or farm fires?

The answer, to my mind, is the insurance industry, particularly the private sector health insurance players whose profitability may choke alongside those affected by health problems triggered or accentuated by Delhi’s annual “pollution season” that has seriously upset what was historically considered one of the finest periods in the capital city already prone to extremes of heat and cold.

Bad hair days are known to the world. The term ‘bad air day’ may well be Delhi’s dubious addition to the world’s trendy urban slang. This year, the season has lasted about six weeks already, on a conservative assessment.

Localised Issue? 

What is worrying is that this is seen as a localised issue, whereas a hard look would reveal that the rapid demographic explosion is a key factor hurting the capital’s ecology.

As I walked past the Indian Institute of Economic Growth last week, the population clock outside ticked past 22.5 million for Delhi, which comes somewhat close to the entire population of Australia at 27 million. Some estimates put that number much higher. With Gurgaon, Faridabad, Noida, Ghaziabad and Sonepat enjoying city status surrounding the main capital and increasingly connected by a metro railway network, the very concept of the city gets fuzzy. The term “agglomeration” seems better. What is clear is that NCR’s population has significantly outpaced the nation’s overall population growth over the decades, though official census numbers are not available after the headcount in 2011.

In effect, migration, construction, and increasing affluence, fueling an automobile boom and other forms of relative luxury, are consuming energy and raw materials in a manner that harms the environment and public health alike.

Health Emergency 

This is where insurers need to stop and take note because the government is speaking in technical idioms that do not mean much.

Last week, Minister of State for Environment Kirti Vardhan Singh told Parliament that there is no direct correlation between higher air quality index (AQI) levels and lung diseases. A few days earlier, he said, “countries prepare their air quality standards based on geography, environmental factors, background levels, socio-economic status and national circumstances.” That effectively shifted the goalposts away from World Health Organisation standards.

But media reports on interviews and statements from public health officials and medical experts clearly sound alarming as they link air pollution to a variety of health risks, short-term and long-term. This is where insurers come in – because they cannot sit on technicalities or shrug off the problem as a localised “normal.”

Media reports over the past month show that pollution-linked insurance claims rose by 14% in 2025 over the previous year, with treatment costs for respiratory illnesses going up by 11 per cent and for cardiac complications by 6 per cent, indicating longer hospitalisation requirements. Insurers are mulling hikes in premiums as risks go up and are also re-evaluating long-term health risks.

Notably, people who live in metro cities like Delhi, Bengaluru and Mumbai, which suffer from higher costs and pollution levels, pay 10 to 20 per cent for the same insurance plan compared with customers in smaller cities.

New Normal 

If high pollution levels spell a “new normal", insurers need to collectively wake up and smell the foul air because it poses risks to profitability and growth. Increased premiums may dissuade some away from buying policies, while life insurers may be quite helpless as some diseases will increase claims that they have to fulfilhonour at the cost of their profits.

One commentator described air pollution as “secular” as it does not distinguish between people based on religion. We could look at caste and gender in a similar light. But senior citizens and children are a different lot. Some face imminent threats to their health, while kids may develop early problems, media reports show.

Insurers need to take note of all this. Hopefully, they will launch a collective campaign to raise awareness and spur public action.

There are two key factors they need to keep in mind. One, the Delhi problem is not of the city but of the entire nation as migration drives uneven regional growth.  Secondly, air is a “public good” (product) and needs to be treated not on the familiar principles of microeconomics but in a framework of shared risks and benefits.

Complicated Issue

Belling the pollution cat is a peculiar challenge in which insurers can turn their vulnerability into an opportunity to boost public health that will lower claims risks. “Money saved is money earned” applies in their case to claims payments. Fewer people crowding hospitals and clinics is good news for insurers who can sell their policies as safety nets, not as a frequently redeemable claim.

The trickiest part is that air pollution is a complicated issue and involves changes in the way governments behave. Construction, public transport, migration and balanced regional development figure – or ought to figure – in policy conversations so that short-term solutions like temporary restrictions are matched by long-term investments and rules that boost electric vehicles, public transport, dispersed populations and limited use of coal.

Big-ticket infrastructure projects are backed by both government officials and business lobbies, whereas green initiatives and balanced regional development are supported mostly by academicians and NGOs. This needs to change. Insurers potentially constitute a meaningful business lobby and could be among the biggest stakeholders in bettering the environment. Human resource issues are also critical, as it is difficult to imagine a young work-force aging faster due to pollution.

(The writer is a senior journalist covering a diverse range of subjects, including economy, technology, and politics. Views are personal.)