Life insurers to sell health policies? Standalone cos to lose, say experts

Non-life insurance companies will face a stiff competition from life insurers

The Insurance Regulatory and Development Authority’s (Irdai’s) move to set up a committee for studying the feasibility of allowing life insurance companies to offer indemnity-based health insurance policies has sparked a debate in the industry. The overarching view is that standalone health insurers would lose the most in this scenario. 

Non-life insurers would not be affected severely as they could focus on other segments. Within the health segment, they could also look at selling more benefit-based products, which thus far formed a minuscule portion of their health business, experts said. 

“It is likely to impact standalone health insurers more than multi-line insurers, since the latter have other products to offer in the market,” said Subramanyam Brahmajoysula, head-underwriting and reinsurance, SBI General Insurance. “Life insurance firms have a superior distribution network. Health insurance indemnity policies can be complex and in-depth knowledge of the product features is required to provide appropriate advice to customers. This is an area where non-life insurance advisors might have an advantage, at least initially.” 

*Includes performance of standalone health insurers and specialised PSU insurers. Source: Irdai

Moreover, experts believe if the regulator goes with the idea, Life Insurance Corporation (LIC), because of its size and reach, will benefit the most, and non-life insurers will have to be on their toes as to how they fulfil customer expectations.  The overarching thought behind the move is to improve the penetration of the health insurance business in India.  Before 2015, life insurance companies were allowed to sell indemnity based products, as well as benefit-based products. But in 2015, the regulator decided that to allow life insurance companies to sell benefit-based products, but not indemnity based products. 

As far as health insurance is concerned, industry experts say, it has always been dominated by non-life insurers. But capacity building in underwriting and claims management is expensive and both standalone health insurance and general insurance firms are struggling to make portfolios large and viable. 

“The life insurance industry has an enormous distribution network. If you look at LIC, it has 1.2 million agents and all other companies put together have a got a million agents. So 2.2 million agents will be selling health insurance. It will be a game-changer not only for LIC, but also for the industry and the country,” said N S Kannan, MD & CEO of ICICI Prudential Life Insurance, at the Business Standard Insurance Roundtable 2020. 

If some portions of the general insurance segment are being opened up, then some of life insurance may also open up, said the CEO of a general insurance company. The health insurance segment is growing and the more firms create awareness, the more they can capitalise on it. Experts said it should not be seen as cannibalisation but as a developmental goal.

Non-life insurers register 15% growth in premiums

Non-life insurers have registered 15 per cent growth in premiums underwritten by them between April and January of this financial year. In absolute terms, premiums underwritten by the insurers totalled to Rs 1.59 trillion, against Rs 1.39 trillion in the same period last financial year. The private non-life insurers grew at 15 per cent in the period, with highest growth recorded in fire, health, and motor segments, while aviation, crop insurance, and credit guarantee struggled. State-owned insurers posted 9 per cent growth in premiums with crop, fire, and credit guarantee insurance performing well. Segments like motor, health, and personal accident lagged behind.