Life Insurance Corporation of India (LIC), a major player in the insurance sector, is planning a strategic entry into the health insurance market through the acquisition of a private health insurer. According to a report by Livemint, LIC is currently considering acquiring one of the five private standalone health insurance companies. This move is part of LIC’s broader strategy to diversify its offerings and tap into the burgeoning health insurance segment.
This development comes on the heels of recent statements by LIC Chairman Siddhartha Mohanty, who highlighted the company’s interest in pursuing “inorganic” growth opportunities. In an interview with PTI on May 28, Mohanty confirmed that internal preparations are underway to explore these new avenues, emphasizing the company’s readiness to expand into health insurance despite its limited experience in general insurance.
However, for LIC, a public sector undertaking, to venture into the health insurance sector, amendments to existing insurance legislation would be necessary. Currently, the Insurance Regulatory Development Authority of India (IRDAI) and the Insurance Act of 1938 prohibit composite licensing, which means an insurer cannot offer life, general, and health insurance under a single entity. Recognizing this limitation, a parliamentary panel has recommended the introduction of a composite license to enable insurers to cover all three segments. This change aims to increase insurance penetration in India, making it easier for companies like LIC to diversify their insurance portfolios.
Mohanty has acknowledged that while LIC is not well-versed in general insurance, it possesses the capability to excel in the health insurance domain. This strategic shift towards health insurance is timely, given the sector’s promising growth potential, especially in the aftermath of the COVID-19 pandemic. The pandemic has underscored the importance of health insurance, driving a surge in demand for various health-related insurance products.
Data from Policybazaar, previously reported by Business Standard, indicates a significant increase in the uptake of Out-Patient Department (OPD) benefits among health insurance customers. In the financial year 2023-24 (FY24), the percentage of policyholders opting for OPD benefits surged to 20%, a notable increase from just 5% in FY21. This trend highlights a growing consumer preference for comprehensive health coverage that extends beyond hospitalization to include regular outpatient care.
Moreover, the health insurance sector has shown robust growth, outpacing the general insurance industry in FY24. According to data released by the General Insurance Council, health insurers have recorded growth rates double that of the general insurance sector, underscoring the expanding market potential and the increasing consumer awareness and demand for health insurance products.
In summary, LIC’s planned entry into the health insurance market through the acquisition of a private health insurer represents a significant strategic shift. This move aligns with broader industry trends and regulatory recommendations aimed at enhancing insurance penetration in India. As the health insurance market continues to grow, driven by increased demand and the lasting impacts of the COVID-19 pandemic, LIC’s foray into this sector could position it well to capitalize on emerging opportunities and diversify its product offerings.
