Standalone health insurers eye 20% growth in FY26 as retail segment expands

Health Insurance

Standalone health insurance companies are projected to achieve 20 percent growth in FY26, fuelled by performance in the retail health segment and agency networks, said a recent India Ratings report.

"The focus on building a book in retail health, supported by strong sponsors, has helped standalone health insurance entities outpace competitors," said Jinay Gala, Director, India Ratings, while presenting the report virtually.

Rising medical inflation and frequent price revisions have bolstered value growth, while increasing awareness of financial de-risking among policyholders is expected to drive volume growth, the report said.

In contrast, group health and government schemes face intense competition from private GI (general insurance) companies and public sector undertakings (PSUs), resulting in lower profitability.

The claim ratios and combined ratios of GIs in these segments lag behind those of standalone health insurers, with margins squeezed by aggressive pricing, the report said.

The combined ratio is the loss ratio (claims paid) plus expense ratio (operating expenses) as a percentage of the premiums.

As for the Ayushman Bharat scheme, while that has boosted mass penetration and reduced out-of-pocket expenses, individual coverage continues to lag, it added.

Loss ratios for standalone health insurers have risen by about 200 basis points compared to pre-pandemic levels, driven by heightened awareness, rising claim severity, and medical inflation.

Frequent price revisions have prompted policyholders to port to more affordable plans, introducing volatility into the market.

While industry-wide loss ratios in the individual health segment remain below 80 percent, a moderation from pandemic peaks, they have inched up in FY25, reflecting ongoing pricing challenges amid competition, the report added.