The burgeoning health insurance landscape is poised for heightened competition and potential consolidation as the Life Insurance Corporation of India (LIC) ventures into the health insurance domain, according to industry insiders.
Rapid Expansion
The rapid expansion of health insurance, attributed to soaring medical costs and increased awareness about health coverage, has catapulted it to the forefront of the insurance sector’s growth trajectory. However, this surge has translated into a substantial escalation of Medicare premiums, witnessing an uptick of 25-50 per cent over the past 2-3 years.
Concerns Over Premium Surge
“The escalating premiums, coupled with persistently low settlements, are emerging as a concern. This trend could potentially dampen demand, prompting discussions on easing GST and the proposed launch of the National Health Claims Exchange (NHCX). The entry of a behemoth like LIC is also expected to compel other insurers to recalibrate premiums to withstand heightened competition,” remarked an analyst.
LIC’s Strategic Move
LIC’s foray into the health insurance arena aligns with the anticipated policy stance of the new government post-elections, endorsing the proposal for a composite license for major insurers.
Chairman Siddhartha Mohanty underscored LIC’s intent to explore avenues for participation in a standalone health insurance entity, emphasizing a meticulous assessment of customer and stakeholder interests. “Expanding into health insurance is a logical progression for us, leveraging our expertise in fixed-benefit products. We are actively strategizing to carve a niche in this segment through inorganic growth,” affirmed Mohanty during an analyst call.
Striking a Balance
LIC’s management has underscored the imperative of striking a delicate balance between margins and future business trajectory amidst competitive dynamics and customer-centric imperatives, noted Macquarie Research in a commentary. The anticipated market entry of LIC portends significant implications for private players, particularly in the general and health insurance domains.
Anticipation of Consolidation
Industry insiders have hinted at anticipations of consolidation in the health insurance sphere, poised to gain momentum with LIC’s imminent entry. With new players entering the fray, opportunities for stake acquisitions are on the horizon, observed a senior industry official.
Current Landscape
Presently, the health insurance sector is populated by five standalone health insurance (SAHI) companies. These include Aditya Birla Health Insurance, a joint venture between Aditya Birla Group and South Africa’s MMI Holdings, and ManipalCigna Health Insurance, a collaboration between Manipal Group and global health services provider Cigna Healthcare. Niva Bupa Health Insurance, backed by PE firm Fettle Tone LLP and UK-based Bupa, and Care Health, supported by Religare Enterprises, constitute other significant players. Additionally, Star Health Insurance boasts diversified shareholding.
Moreover, IRDAI has granted approval to TVS Group-backed Galaxy Health and Allied Insurance and Narayana Hospitals-backed Narayana Health to commence operations, signaling further diversification in the health insurance landscape.
