India: AI, Health Insurance to Fuel Growth for Healthcare Providers

Summary:
India’s healthcare sector is expected to maintain strong growth, supported by wider health insurance coverage, government initiatives such as Ayushman Bharat, corporate wellness programmes, and rising investor interest. Increased insurance penetration has improved healthcare affordability, reducing out-of-pocket spending, while Tier 2 and Tier 3 cities now account for the majority of new health insurance policies. Despite challenges such as rising costs, workforce shortages, cybersecurity risks, and legacy technology systems, Deloitte projects the hospital sector to grow 10–15% in FY2027, driven by expanding insurance coverage and the adoption of AI-enabled specialised healthcare services. 

The healthcare sector is expected to witness steady growth, driven by expanding health insurance coverage, increasing corporate wellness initiatives, and continued investor confidence. Government programmes such as Ayushman Bharat Pradhan Mantri Jan Arogya Yojana, along with rising adoption of private health insurance, are making healthcare services more affordable and accessible. This progress is reflected in the decline in out-of-pocket healthcare spending from 62.6% of total health expenditure in FY2015 to 39.4% in FY2022, indicating a stronger and more sustainable demand outlook.

However, the sector continues to face several challenges, including rising healthcare costs, ongoing shortages of skilled professionals, growing cybersecurity concerns, and tighter regulatory oversight. Legacy technology systems and interoperability issues also remain barriers to fully leveraging digital transformation.

The report further highlights the increasing contribution of Tier 2 and Tier 3 cities, which now account for 62% of newly issued health insurance policies, exceeding the share of metropolitan regions.

Commenting on the outlook, Joydeep Ghosh, Partner and Leader, Life Sciences & Health Care at Deloitte South Asia, said India’s healthcare and life sciences sector is entering a pivotal phase, with the hospital industry expected to expand by 10% to 15% in FY2027, supported by broader insurance penetration and the growing adoption of AI-powered specialised healthcare services.