‘Retail health insurance market can give 20% RoE annually’


According to a report by Avendus Capital, India’s private health insurance industry has the potential to earn 20% annual return on equity, even as the industry has seen a surge in demand fueled by an increase in policy purchases by families and individuals post covid.

The personal health insurance segment only covers health insurance policies purchased by individuals or families.

The report, “Retail Health Insurance: A Large Whitespace,” also forecasts a $25 billion market size for this space in FY27, up 5.3x from the $4 billion recorded in FY22.

“In India, the health insurance segment is currently dominated by five standard health insurers (SAHIs): Religare-guided health insurance, Niva (Max) Bupa health insurance, Aditya Birla health insurance, Star Health and Allied Insurance and ManipalCigna Health Insurance,” the investment bank’s report said.

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These entities have disrupted the market by capturing more than 50% market share and are expected to benefit the most from the growth within the segment, the study said, adding that these companies have historically received significant interest from both international and domestic investors.

For example, Aditya Birla Health Insurance won awards last year 665 crore from Abu Dhabi Investment Authority (ADIA) while Religare Enterprises Ltd was in the process of collecting it 300 for Healthcare Healthcare insurance through a rights issue.

“SAHIs have established a presence in the health retail segment. Awareness of post-Covid health insurance has acted as a strong catalyst. As retail health distribution is primarily driven by individual agents, SAHI’s focus on single product and distribution arbitrage over multi-line insurers gives them a competitive advantage,” said Snigdha Khemka, director – Consumer, Financial Institutions Group (FIG) and Business Services , Avendus Capital.

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For investors, private health insurance continues to be one of the most exciting segments within the overall non-life insurance or non-life insurance space. Anshul Agarwal, general manager and co-head, consumer, FIG and business services at Avendus Capital, believes the segment will continue to see significant investment due to its high persistence rate, relatively low loss rate and room for growth due to the low penetration.

“The ability to generate consistently high profits and RoE above 20% would explain continued investor interest due to the limited opportunities in companies purely focused on the health retail segment,” said Agarwal.

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The report also pointed out that as approximately 45% of the relevant population of India currently has no health insurance of any kind, the private health insurance segment is expected to be the leader among other non-life segments.

According to the report, low penetration rate (with only 60 million insured), coupled with a Covid-led rise in awareness, product innovation, rising disposable income etc. are some of the key drivers of growth in the health retail segment, will expected to reach about 250 million people.

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