Standalone health insurance firms may be a reality soon

Finally, there are indications of standalone health insurance companies establishing their presence in India by forking out a capital requirement of Rs 100 crore rather than waiting for the recommendations of the health insurance committee making it a regulation.

This becomes a possibility with Star Health and Allied Insurance filing an application with the Insurance Regulatory and Development Authority (Irda).

CS Rao, chairman, Irda, told Business Standard, "The country can witness specialised health insurance companies in a matter of months if the norms to set up standalone health insurance follow the same route of the regulations for establishing a general insurance company."

Rao said only one company - Star Health and Allied Insurance - had in August filed an application with the regulator for a standalone insurance company.

On the other hand, legislative changes required for the implementation of the recommendations of the working committee on health insurance will take a longer time, he added.

The working committee on health insurance had spelt out three major recommendations: reduction in capital base required to set up health insurance companies from Rs 100 crore to Rs 50 crore, raising foreign direct investment to 51 per cent from the existing 26 per cent and that solvency margins must be estimated on the basis of risk, and not capital.

Some groups such as Apollo Hospitals have been keen on establishing a standalone health insurance company. But, it is believed that the current minimum capital requirement of Rs 100 crore and foreign equity of just 26 per cent have discouraged many players to enter this segment.

Rao said the recommendations of the working committee on health insurance are with the ministry of finance.

When asked about Life Insurance Corporation's (LIC) interest in setting up a health insurance subsidiary, Rao said there are two issues since the corporation is owned by the government of India. One, the ministry of finance will have to give its nod on the subject.

Second, LIC will have to draw out plans on how it proposes to enter the health insurance "� whether it will be a wholly-owned entity of the corporation or it will go in for an overseas partner.

Rao also pointed out that though health insurance has been the domain of general insurance companies, there have been no legal restrictions on life insurance companies selling health-cover product.

No doubt there are synergies between life insurance companies and health cover, but the companies have been focused on selling life insurance and providing critical illness cover as riders, he added.