LIC’s health insurance foray to heighten competition, may trigger consolidation

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Life Insurance Corporation of India’s foray into the health insurance segment is expected to heighten competition in the already crowded health insurance space and may even trigger some consolidation, according to industry players.

Health insurance has been the fastest-growing insurance segment on the back of a sharp rise in medical inflation and increased awareness about health coverage. However, this has led to a sharp rise of 25-50 per cent in Medicare premiums over the past 2-3 years.

Premium Surge

“The premium surge is becoming an issue in the face of persistently low settlements. It could temper demand, which is why discussions are happening around easing GST and the launch of the National Health Claims Exchange (NHCX). The entry of a player like LIC could also force other insurers to pull back on premiums to some extent due to increased competition,” an analyst said.

LIC’s Medicare expansion is being driven by the expectations of the new government post-elections, giving its go-ahead to the proposal for a composite licence for large insurers.

“We will definitely explore possibilities to have some stake in a standalone health insurance company; that’s something we are working on. What will be in the best interest of customers and other stakeholders is being worked out now,” Chairman Siddhartha Mohanty said in an analyst call.

LIC is already in the health business, and while it does not sell indemnity cover, the company is quite experienced in fixed-benefit products, Mohanty said, adding that expanding into health insurance is the obvious choice and the insurer is working on plans to “occupy some space” in the segment through inorganic growth.

Also read: LIC Q4 results: Net profit at ₹13,763 crore, PAT growth muted by wage expenses

LIC’s management said that margins and future business trajectory will be a fine balancing act, keeping in mind competitive forces and customer benefits, Macquarie Research said in a note, adding that LIC will remain a formidable force as its aggressiveness has implications for other private players, especially general and health insurers, given the proposed foray into health.

“There is already some talk and expectation of consolidation in the health space, which will accelerate if LIC steps in. New players are also coming in, so there are some opportunities to pick up stake,” a senior industry official told businessline.

Currently, there are five standalone health insurance (SAHI) companies in the country. Aditya Birla Health Insurance is a joint venture between Aditya Birla Group and South Africa’s MMI Holdings, whereas ManipalCigna Health Insurance is a joint venture between Manipal Group and global health services provider Cigna Healthcare. Niva Bupa Health Insurance is a joint venture between PE firm Fettle Tone LLP (the SPV of True North Fund VI LLP) and UK-based Bupa, and Care Health is backed by Religare Enterprises. Star Health Insurance has a diversified shareholding.

Further, TVS Group-backed Galaxy Health and Allied Insurance and Narayana Hospitals-backed Narayana Health have received the go-ahead from IRDAI to start operations.