LIC to Acquire Private Health Insurer, Enters Health Insurance Sector: Report

Life Insurance Corporation of India (LIC), the country's insurance behemoth, is reportedly planning to enter the health insurance market through an acquisition, as reported by Livemint on Friday. The company is eyeing one of the five standalone private health insurance firms in India.

This development follows recent statements by LIC Chairman Siddhartha Mohanty, who indicated the company's exploration of "inorganic" options for its foray into health insurance. "Internal work is going on," he told PTI in a May 28th interview, highlighting LIC's pursuit of "inorganic growth" in the health insurance sector.

LIC Seeks Inorganic Growth in Health Insurance

Regulatory Hurdles and Potential Solutions

Currently, Indian insurance regulations, including those outlined by the Insurance Regulatory Development Authority of India (IRDAI) and the Insurance Act of 1938, do not permit composite licensing. This means a single entity cannot offer life, general, and health insurance under one roof.

However, a parliamentary panel has proposed introducing a composite license to allow insurers to operate in all three segments. This move aims to increase insurance penetration in India. LIC Chairman Siddhartha Mohanty himself acknowledged that while LIC lacks expertise in general insurance, health insurance represents a viable option.

Post-Pandemic Surge in Health Insurance

The growing interest in health insurance aligns with the promising growth potential witnessed in the market since the Covid-19 pandemic. Experts believe the global health crisis has heightened awareness of personal health, leading to increased demand for services like preventative health checkups.

Earlier reports by media agency, citing data from Policybazaar, highlighted a significant rise in the uptake of Out-Patient Department (OPD) benefits among health insurance customers. The share of policyholders opting for OPD benefits grew to 20% in the financial year 2023-24 (FY24), compared to a mere 5% in FY21.

Conclusion

Life Insurance Corporation of India LIC's potential entry into the health insurance market through acquisition presents a significant development for the Indian insurance landscape. This move could reshape the competitive landscape, potentially leading to increased product offerings, wider distribution networks, and ultimately, greater insurance penetration. However, regulatory hurdles regarding composite licensing need to be addressed for a smooth transition.

The success of this strategy will depend on LIC's ability to leverage its vast experience and integrate effectively with the chosen private health insurer. With a growing health-conscious population and a promising health insurance market, LIC's foray into this sector holds the potential to benefit both the company and Indian consumers.