Distributors opting for short-term health plans over long term post commission rule change: Niva Bupa CEO

Krishnan Ramachandran, MD & CEO, Niva Bupa

Distributors are leaning towards selling short-term health insurance policies after recent changes to commission regulations, which has contributed to a decline in Niva Bupa’s long-term policy sales, according to CEO Krishnan Ramachandran

The decline in long-term policies is a direct response to altered distributor incentives, he said, in an interaction with Moneycontrol.

He also said the health insurer’s internal goal is to grow 5-10 percentage points faster than the overall health insurance industry.

On composite licensing, Ramachandran said, the company sees no opportunity in life insurance and intends to stay focused on the health segment.

Edited excerpts:

Your profit growth is steep, nearly double at 97 percent. What’s driving this sharp improvement?

The primary driver is operating leverage. As we scale up, the proportion of business that comes from policy renewals increases. Acquiring a new customer is expensive, as you incur upfront costs such as distributor commissions and sales expenses. But when a customer renews, the servicing cost is significantly lower. You pay a trail commission and maybe 3-4 percent in management expenses. So, as the renewal book grows in size, profitability improves sharply. That’s what you’re seeing in the numbers.

Despite premium growth, your AUM has been flat quarter-on-quarter. Why is that?

That’s mainly due to seasonality. In the first quarter of the year, we make a number of reinsurance settlements, both obligatory and voluntary. These payments are made annually and result in a net cash outflow even as the business continues to grow. We also make bonus payments to employees around this time, but those are relatively small in the context of the overall AUM. The main impact comes from reinsurance settlements.

Let’s talk about the 32 percent growth in the retail segment. Is it mostly from new customers or higher ticket sizes?

It’s primarily from volume growth. About 80–85 percent of the growth came from more people buying health insurance policies. The remaining 15–20 percent came from value growth, that is, customers opting for higher sum insured or choosing more comprehensive products. So, the strong retail growth you’re seeing is largely a result of expanding our customer base.

There seems to be an uptick in claims this quarter, especially in retail. What’s contributing to that?

The reason for the higher claims payout is simply the increasing size and maturity of our portfolio. As the number of policyholders rises and the book ages, the volume of claims increases. This is in line with our expectations and within plan.

What does your business mix look like now, between retail, group, and other segments? Do you expect that to change?

Our business mix has been quite stable over the past few years. Currently, around 67 percent of our portfolio is retail health, about 31 percent is group health, and the remaining 2 percent is personal accident and travel insurance. We’re comfortable with this mix and don’t foresee significant changes in the near term.

Your claim rejection rate has held steady at around 7 percent, while some other insurers have brought theirs down. Do you see scope for improvement?

Our strategy has always been to be consistent and to settle every genuine claim. That also means we must continue rejecting claims that are fraudulent or not within the policy’s scope. From our internal data, we estimate that about 3-4 percent of claims in the market involve fraud or abuse, and we believe it’s important not to honour those. Paying such claims may look good for short-term metrics, but in the long run, it increases costs for honest policyholders by driving up premiums. Over time, as our book matures and policyholders move past moratorium periods, we may see some improvement in settlement ratios. But we don’t expect a dramatic shift this year. Ultimately, maintaining discipline in claims handling protects both the business and our customers.

Have you seen an increase in fraudulent claims?

Not in fraud volumes specifically, but we are seeing a more contentious environment. There’s been a rise in third-party players who advise customers to litigate or challenge claim rejections. As a result, we’ve observed an increase in legal disputes, even when our decisions are contractually sound.

Your share of long-term policies has also declined from 27 percent to 20 percent. What explains that trend?

Yes, this is largely the result of regulatory changes in how commissions can be paid. Distributors are now finding it more attractive to sell shorter-term policies, as these offer better immediate economics under the new rules. So it’s not a strategic shift on our part, but more of a reaction to how distributor incentives have changed.

Your banca channel has grown by 20 percent and is at 29 percent right now. It appears you have also invested significantly into expanding this channel particularly. Are you focusing on growing your banca channel a little more now?

Our distribution is quite well diversified. Agents account for about 30 percent, banks (bancassurance) contribute around 28–29 percent, non-bank financial companies (NBFCs) about 10 percent, brokers around 29 percent, and our direct-to-consumer digital business is at 11.5 percent. We’re not overly dependent on any one channel, which gives us flexibility. As for growth, we’re looking to invest across all our channels. Our goal is to grow 5-10 percentage points faster than the market, and for that we need every part of the distribution engine firing, whether it’s banks, brokers, agents, or digital platforms.

Do you expect your market share to improve from here?

Yes, I’m confident it will. If we continue to grow faster than the market. I’ll refrain from giving a number, but the fundamentals are strong, our product mix is stable, and we’re investing across the right levers such as distribution, technology, and customer awareness.

What kind of growth are you targeting for FY26? Any specific guidance?

We don’t offer formal guidance, but I can reiterate our internal ambition: to grow 5-10 percentage points faster than the overall industry.

There’s talk of a dedicated health insurance regulatory body. What’s your view on that?

We support the idea. Medical inflation is a real and persistent issue, and we believe that a dedicated health regulator could play a crucial role in controlling costs. We’re already part of industry efforts like the common empanelment initiative, which aims to standardise hospital rates and improve transparency. The General Insurance Council is also working on protocols for evidence-based care, especially around infection management. If implemented well, such measures can make health insurance more affordable and accessible.

What are your thoughts on the Insurance Bill proposal for 100 percent FDI and composite licensing? Would Niva Bupa be interested in life insurance too?

We have no intention of entering life insurance. Our focus remains squarely on health. That said, there are some important provisions in the amendment bill that we find quite promising. First, the move toward 100 percent FDI is very positive. Health insurance is a capital-intensive business, especially if you’re serious about long-term growth and expanding distribution. We believe this change will enable more sustained investments, especially in digital capabilities and outreach to underserved markets. Another positive development is the ability to offer ancillary healthcare services. This is critical for us because Bupa is not just a health insurer, it also runs healthcare services globally. We’ve already built a robust ecosystem here in India, offering things like doctor consultations, home delivery of medicines, and chronic disease management. With this reform, we can deepen those services and provide even more value to customers. So, from our standpoint, the bill opens the door to greater integration of health and healthcare, allowing us to be not just insurers, but partners in long-term wellness.

You’ve also invested quite a bit in technology this quarter, for instance, into systems like Oracle. Is technology the focus, given the growing digital dependency and the rise in cyberattacks?

Technology is a core focus for us, and we’ve significantly automated every part of the value chain, from partner onboarding and customer acquisition to underwriting, claims, and renewals. Today, 100 percent of customers are digitally onboarded, 50 percent of our policies are underwritten without human intervention, and over 90 percent of our customers renew digitally. With that comes the responsibility to stay secure. Bupa has a global cybersecurity framework called Volt, and we’ve adopted that in India as well. It covers everything from perimeter security to protecting sensitive customer data. We believe this framework gives us a strong foundation to manage the risks that come with increasing digitisation.