LIC set to enter health insurance sector, aiming for major market share

Life Insurance Corporation (LIC), India's largest insurer, is gearing up to enter the health insurance market with ambitions to secure a significant share. This strategic move was confirmed by a top official, indicating LIC's intent to become a key player in this rapidly growing sector.

The life insurance industry has been eagerly awaiting government amendments to the Insurance Act that would introduce a composite licensing regime. Such a regime would allow life insurers to offer non-life products, including lucrative health insurance policies. Currently, India’s insurance market comprises 70 players, with a mix of standalone health insurers and those offering both life and general insurance products.

Many Western countries operate under a composite licensing model, which was also permitted in India until 2016. That year, the Insurance Regulatory and Development Authority of India (IRDAI) restricted life insurers from offering general and health products. LIC’s plans to enter the health insurance market were first revealed in May when the corporation expressed interest in acquiring a majority stake in an existing health insurer. This approach aims to leverage an early advantage rather than starting from scratch.

"We want to be a large and serious player in the health insurance segment," said LIC’s Chief Executive Siddhartha Mohanty in a recent interaction with TNIE. "We are confident that we can make a significant impact because the market potential is enormous," he added.

Mohanty reiterated the company's strategy to acquire a stake in an existing health insurance company. "We will be buying a large stake in an existing health insurance company, and we are working hard on that. Hopefully, soon we will have an announcement to make on that front," he stated.

Earlier this year, a parliamentary panel recommended the establishment of a composite insurance licensing regime. This change would reduce costs and ease the compliance burden for insurers, currently limited to offering long-term health benefits. Amending the Insurance Act would be necessary to allow life insurers to provide hospitalization and indemnity coverage.

Despite its growth, India’s insurance market remains under-penetrated. Life insurance penetration is less than 5%, while health insurance covers approximately 60% of the population, or around 650 million people. Of these, 350 million are under government-sponsored programs, and about 200 million have group insurance coverage.

The government and IRDAI aim to expand health insurance coverage to achieve universal coverage by 2047. LIC’s entry into the health insurance market is expected to significantly boost these efforts, leveraging the corporation’s strong brand presence and extensive sales force of over 1.3 million agents.

For the financial year ending in March 2024, LIC reported a net profit of Rs 40,676 crore, up from Rs 36,397 crore in the previous fiscal year. The total premium income for the year was Rs 4,75,070 crore, slightly higher than Rs 4,74,005 crore in March 2023.