Health insurers capital limit may be cut to Rs 25 cr

The government will lower the minimum threshold limit for standalone health insurance companies to Rs 25 crore.

"There is a case for the government to reduce the capital requirement to encourage stand alone health insurance companies to enter the market," said S K Mahapatra, former secretary of the General Insurers' Public Sector Association (Gipsa).

Currently the minimum capital requirement stands at Rs 100 crore for setting up an insurance company. The proposed move is aimed at encouraging promoters to set up a health insurance company. To date, there has not been any application made for setting up a health insurance entity.

Following the lowering of the capital requirement, necessary amendment will need to be made to the IRDA Act, which states that licences can be granted to non-life insurance companies with a capital base of Rs 100 crore.

The Insurance Regulatory and Development Authority (IRDA) had earlier proposed a reduced capital base of Rs 50 crore.

Global health insurance majors "" Cigna and Dupa "" had lobbied strongly with the insurance regulator to bring down the minimum share capital to Rs 25-30 crore.

The high capital requirement of Rs 100 crore has discouraged participation by Indian promoters, who would need to put in 74 per cent of the capital, said IRDA officials.

At the same time, leading global players like Aetna, Brooke Shield, and Blue Cross among others have shown interest in the Indian market. Further, the cap on foreign direct investment at 26 per cent continues to be a deterrent.

The current low premium base does not make a viable proposition for the promoters. Despite estimates that the Indian healthcare market will see levels of Rs 6,000 crore to Rs 7,000 crore, the growth in health insurance premium cannot be expected to be exponential.

Growth is slow as it is driven by the healthcare delivery sector, which has yet to be developed. In addition to reducing the minimum capital requirement to Rs 25 crore, the government will also need to address state regulations pertaining to healthcare services through the health ministry.

Today less than 50 lakh of the Indian population is covered under healthcare insurance schemes and tapped for health care services.

Expressing concern over the lack of interest of players in the health insurance sector, C S Rao, chairman IRDA, however, added that since the opening of the sector, the number of lives covered under health plans have improved from 4-5 million about six years back to over 12 million today.