Life insurance companies may offer more health policies


Mumbai: India’s insurance regulator Irda has set up a committee to study the feasibility of allowing life insurers to sell indemnity-based health products. Until now, these companies were allowed to sell only benefits-based health products.

If the nine-member panel recommends the move and the Centre gives the green light, this will pave the way for Life Insurance Corporation (LIC) to further consolidate its dominance of the country’s insurance landscape using its expansive distribution network to potentially seize market share from health insurers ahead of its much-publicised IPO next year.

However, stakeholders and market observers point out that while such a move can bring muchneeded improvement in coverage of health-based products, the proposition may face stiff resistance from health insurers.

“Opening of indemnity health insurance business to life insurers will increase competition in the health segment and affect non-life insurers. As such, this kind of proposal will be opposed by non-life insurers as in the past,” ICICI Securities said. “If the proposal is passed, it will open new business opportunities for life insurers, benefitting LIC and big private life insurers with distribution advantage, while standalone health insurers will face the most risks.”

Indemnitybased health policies are basically those insurance policies where the insured is reimbursed the actual expense incurred during hospitalisation up to the total sum insured agreed under the policy. The move was welcomed by life insurers which claim that opening of new distribution channels will help customers find better price discovery and improved services.

The committee is headed by National Insurance Academy chairman G Srinivasan with representatives from top life insurers, general insurers and standalone health players. Irda said that it set up the committee following representations from life insurers seeking expansion of their product offerings to make better use of their distribution networks.

“Irda (Health Insurance) Regulations 2016 allows life insurance companies to offer benefits-based health insurance products only. Representations have been received from life insurers to allow them to offer indemnity products as well,” the insurance regulator said.

Over the past decade health insurance has been registering a CAGR of around 20%. Health coverage for citizens has also been recognised as one of the important elements of state’s public healthcare policy framework. However, low penetration and challenges in scaling of government’s Ayushman Bharat scheme could have also been motivating factors for regulators to initiate these discussions, say experts.

“Allowing life insurers to sell indemnity products will help provide a host of benefits to customers,” said Tarun Chugh, CEO, Bajaj Allianz Life Insurance.

“Given the low penetration of health insurance in the country, selling the value-packed products through life insurer’s strong distribution network — agents/partners/online — will help take the benefits of health insurance to many more customers,” he added.