LIC, with assets worth over ₹51 trillion and a market share of over 61.5% in life insurance, is keen to secure a composite licence—a licence planned to be introduced by the Insurance Regulatory and Development Authority of India (Irdai) that will allow an insurer to sell both life and non-life policies.
“For LIC, this makes sense. The work is on internally. The composite licence may take about 2–3 months and then, LIC may consider acquiring an established health insurance company and grow the business from thereon,” one of the two executives cited above said on condition of anonymity.
LIC submitted its health insurance plans to Irdai recently, but it does not involve any proposal for a merger with state-run general insurer, the people cited above said.
“LIC is keener to acquire a standalone health insurance business. There are multiple options being weighed on. One option before LIC is to take over one of the five standalone (health insurance) players, preferably one that has strong digital capabilities,” said this executive.
First state-owned standalone health insurer
India’s five standalone health insurers, all of them privately owned, are Niva Bupa Health Insurance Co. Ltd, Aditya Birla Health Insurance Co Ltd, Care Health Insurance Ltd, ManipalCigna Health Insurance Co Ltd, and Star Health & Allied Insurance Co Ltd. Any standalone health insurer acquired by LIC will become the country’s first state-owned standalone health insurer.
The LIC executives said the state-run insurer plans to leverage its vast network and agency force of over 1.41 million to sell pure, traditional Mediclaim and health indemnity products after acquiring a readymade health insurance company.
A buyout will require approvals from the Irdai and the ministry of finance since LIC is owned by the central government.
Emails sent to LIC, Irdai and the department of financial services under the finance ministry remained unanswered.
India’s private standalone health insurers together underwrote a premium of ₹32,351 crore in FY24, about 27% higher than the previous year. Within the health insurance industry, standalone health players collectively have a market share of 29.7%, with Star Health as the largest standalone insurer with a 14% share.
But in the overall health insurance space, New India Assurance Co. is the largest with a share of 16.81%. Among the standalone health insurers, Care Health and Niva Bupa follow Star Health with a market share of 6.11% and 5.06% respectively.
In FY24, the 29 general insurers underwrote a premium of ₹2.9 trillion, growing by 12.78% year-on-year. Of this, health insurance business alone contributed ₹1.09 trillion in premium underwritten during fiscal 2024, recording a 20.25% growth.
No funds set aside yet
LIC has not set aside any specific sum for the acquisition, since its plans are in a nascent stage.
Irdai’s FY23 annual report says all insurers together have covered a little over a third of the country’s population or 550 million lives under 22.6 million health insurance policies in fiscal 2023.
LIC’s health business plan aligns with Irdai’s “Insurance for All by 2047″ vision. While the acquisition plans are in a preliminary stage, health insurance has logged its fastest growth since the outbreak of covid-19 pandemic.
Addressing analysts on 28 May, LIC’s chairman Siddhartha Mohanty said, “So far as health is concerned, you see, we are already in health business. We are selling health insurance products though these are not indemnity products, fixed benefit products we are quite experienced.”
LIC currently offers two limited, fixed-benefit health covers that provide hospital cash in case of hospitalization. Of LIC’s total premium income of ₹ 4.75 trillion in FY24, it earned a premium of around ₹300 crore from these basic health products. Health Insurance contributed 0.07% to the overall non-par new business premium of LIC for FY24.
The LIC executives told Mint that health insurance is a natural choice for the company and it has done “some internal work” to occupy some space within the health insurance segment.
“LIC is exploring some inorganic kind of growth,” said the executives, adding that the plan entails an aim to cater to the society’s need in terms of health covers.
As per a Swiss Re Sigma Report, the penetration of non-life insurance in India remained at 1% at the end of FY2023.
In the health insurance space, in FY23, insurers settled 23.6 million claims and paid ₹70,930 crore towards claim settlements.
Healthcare costs have been rapidly rising in India, compelling customers to buy health covers, but the issue of actual cost incurred and the amount approved by the health insurer persists.
LIC’s plans come in the backdrop of a widespread debate over standardization of prices for treatments and diagnosis across the country’s hospitals.
Given LIC’s size and scale, its entry into health business may change the country’s healthcare landscape. Healthcare sector is growing fast and in last budget of 2023-24, the ministry of health and family welfare has been allocated ₹89,155 crore in the wake of rising treatment costs for lifestyle health issues such as heart strokes, diabetes and respiratory ailments.