Deliberation On Allowing Life Insurers To Sell Health Insurance Products: Report

The Insurance Regulatory and Development Authority of India (IRDAI) is deliberating on allowing Life Insurance companies to sell health insurance indemnity products, either only distribution or both manufacturing and distribution. However, the regulator said that same is under consideration and no decision has been taken yet.

According to a report by a reputed market researcher, the primary purpose around this move is to increase the penetration of retail health which stands at only 4 per cent in the country. 

The penetration of retail health insurance in India remains weak despite almost 30 players selling such products. Only 4 per cent of India’s population has retail health policies.

The report said that out-of-pocket expenditure accounts for 63 per cent of healthcare spend. In this backdrop, IRDAI is looking to quicken the pace of penetration and bring every household in India under the health insurance umbrella.

In the near term, SAHIs (Stand-Alone Health Insurers) will continue to be in an advantageous position if life insurance players are allowed to launch and distribute health insurance products. Retail Health Insurance is dominated by SAHIs, with approximately 53 per cent market share, followed by PSU and Private multiline insurers, with a 23-24 per cent market share.

Recently, IRDAI Chairman Debashish Panda said the regulator will not implement the same in a rush and will arrive at a decision after thorough deliberations with all stakeholders.

Life insurers see sales of indemnity-based Health Insurance as a large opportunity as they predominantly sell health insurance products globally. Health insurance products can be complementary offerings along with their Life Insurance products, the report stated.

The underwriting practices will not be materially different for Health Insurance products as compared to Life Insurance products, and hence companies see no major challenge in this aspect. The key challenge will be replicating the hospital network tie-ups that SAHIs have established over the years. Life Insurance companies will take a long time to replicate the same, the report added.

The report highlighted the key takeaways from this move which includes the opportunity that is large enough for both life insurance and health insurance players to grow together. Some life insurers have past experience in selling these products. The key challenge for life insurance players will be to mirror the claim processing capabilities of SAHIs and in building a hospital network while SAHIs have further advantage in terms of distribution through individual agents and product development. On receipt of the requisite clearance, any meaningful scale up will need a few years.

In spite of 25 other players selling retail health insurance products, SAHIs have been able to grow their market share to 53 per cent in 4QFY22 from 38 per cent in 1QFY20 in the retail health category. If life insurance companies are allowed to distribute health insurance indemnity products, smaller players, not having a general insurance or a health insurance group company, will scout for partnerships, and SAHIs, given their
scale, will have an upper hand, said the report.

Meanwhile, in its continuous endeavour towards promoting ease of doing business for insurance companies in India, IRDAI has reviewed and rationalised the regulatory returns to be filed by the Insurance Companies.

In its latest circular, IRDAI has reduced the number of off-line returns being submitted by Life Insurers from 40 to only four whereas the number of online returns would come down from eight to five. Three separate certification requirements have also been consolidated into one.

It is expected that reduced compliance burden will enable insurers to better focus their efforts and time in reaching out to every Indian with the ultimate goal of improving coverage and penetration.