The government-owned Life Insurance Corporation, LIC, is considering entering the highly lucrative health insurance sector and is currently exploring potential acquisition opportunities. 

This information comes from a report citing LIC chairman Siddhartha Mohanty; the move is being considered as the sector anticipates a regulatory change allowing composite insurance companies.

In February 2024, a parliamentary committee recommended the introduction of composite insurance licenses to reduce costs and regulatory challenges for insurance providers. 

Currently, life insurance companies can only offer extended health insurance benefits. An amendment to the Insurance Act would be necessary to enable these companies to provide hospitalization and indemnity coverage.

LIC’s entry into health insurance is expected to increase coverage significantly. 

“We anticipate that composite licenses may be permitted by the new government, and we have prepared internally for this possibility. Although we lack expertise in general insurance, we are keen on entering the health insurance market and are exploring opportunities for inorganic growth,” said LIC chairman Siddhartha Mohanty.

Tapping The Indian Health Insurance Market

India’s insurance market remains significantly under-penetrated, with less than 2.3 crore health insurance policies issued by the end of 2022-23, covering roughly 55 crore individuals.

Government-sponsored initiatives covered nearly 30 crore individuals, while group insurance accounted for nearly 20 crore; however, both the government and regulators are advocating for increased issuance of health insurance policies. 

The entry of LIC is expected to catalyze growth in this sector. According to Irdai data, life insurers issued fewer than 2.9 lakh new policies during FY23, covering almost 3 lakh lives.

LIC’s Results

Meanwhile, insurance giant LIC contemplates foray into the health insurance segment, it reported a marginal 2 per cent increase in net profit, reaching Rs 13,763 crore for the fourth quarter, which ended March 2024, mainly due to provisions made for a wage hike.

In the corresponding quarter a year earlier, the insurer had recorded a net profit of Rs 13,428 crore.

According to a regulatory filing, LIC’s total income rose to Rs 2,50,923 crore during the reporting quarter, up from Rs 2,00,185 crore in the same period of the previous fiscal year.

At the same time, income from first-year premiums also saw an improvement, increasing to Rs 13,810 crore in the January-March quarter from Rs 12,811 crore in the same period the previous fiscal year.

Renewal premium income in the reporting period climbed to Rs 77,368 crore, compared to Rs 76,009 crore a year ago.

For the full financial year ended March 2024, LIC’s profit was Rs 40,676 crore, up from Rs 36,397 crore in the previous fiscal year.

The total premium income for the year ended March 2024 was Rs 4,75,070 crore, slightly higher than the Rs 4,74,005 crore recorded in the year ended March 2023.

In FY24, 2,03,92,973 policies were sold in the individual segment, compared to 2,04,28,937 policies sold in the previous fiscal year.

The board has recommended a final dividend of Rs 6 per share for 2023-24, subject to shareholder approval, announced the LIC Chairman.

The Growing Market For Health Insurance

India’s health insurance market is looking at substantial growth in the coming years. 

According to Insights10, the market is projected to expand from $36.85 billion in 2022 to $82.5 billion by 2030, with a compound annual growth rate (CAGR) of 10.6%. 

Statista Market Forecast predicts that the market size will reach $89.45 billion by 2024, with an average spending per capita of $62.05.

In 2022, the Indian health insurance market size was valued at USD 12.86 billion. 

The increasing health insurance coverage in India can be attributed to rising costs of high-quality healthcare, increasing income levels, longer life expectancies, and a shift towards non-communicable diseases. 

Moreover, the COVID-19 pandemic has elevated awareness of life’s unpredictability and the need for financial preparedness in medical emergencies. 

As a result, in the past two years, this has led to a significant transformation in the health insurance industry in India.

Driven by the pandemic and rising premium prices, consumer attitudes towards health insurance have shifted considerably. This has resulted in a massive rush by people to insure themselves and their families against catastrophic out-of-pocket medical costs. 

Consequently, the total health insurance premium collected in India saw a remarkable increase of around 25% within a year.

Driving Forces Behind India’s Expanding Health Insurance Market

Vital democratic factors, growing partnerships, evolving distribution networks, and substantial government initiatives underpin the growth trajectory of India’s health insurance sector. 

An example of this is the November 2021 agreement between the Indian government and the World Bank, injecting USD 40 million to enhance health services in Meghalaya, including its health insurance program. 

Additionally, the government’s extension of a USD 66.85 thousand (Rs. 50 lakhs) insurance coverage program for healthcare professionals nationwide resonates with its endeavour to provide healthcare access.

Thus, health planners in India are increasingly advocating for expanding health insurance, recognizing it as key to the nation’s healthcare reform and poverty reduction objectives. 

The adoption of universal health insurance, which aims to curb health disparities and out-of-pocket health expenditures, is a critical step toward realizing this vision.

Moreover, the Indian insurance industry is said to have witnessed a wave of innovative policies driven by rising incomes, growing purchasing power, and household savings. 

Market Share Insights

The intensifying competition in the Indian health insurance market has spurred strategic manoeuvres among key players to fortify their market presence.

Initiatives such as partnerships, collaborations, and novel service launches are commonplace strategies to cater to the demand for high-quality, affordable health policies. 

For instance, in November 2022, Star Health and Allied Insurance rolled out the Star Patient Care Insurance Policy, designed to offer comprehensive health and wellness benefits at competitive pricing. This policy aims to bridge the gap between inpatient hospital costs and outpatient expenses. 

The Last Bit

Hence, LIC’s strategic entry into the growing health insurance sector will yield manifold benefits for the company. 

Firstly, it aligns with the evolving nature of healthcare in India, tapping into the growing demand for comprehensive insurance coverage amid rising healthcare costs. 

Secondly, leveraging its established brand and extensive network, LIC can effectively penetrate untapped markets, thereby expanding its customer base and revenue streams. 

Thirdly, by diversifying its portfolio to include health insurance products, LIC can mitigate risks associated with fluctuations in the life insurance market, ensuring sustained profitability and resilience. 

LIC’s foray into health insurance will not only strengthen its market position but also contribute significantly to the advancement of healthcare accessibility and financial inclusion in India.