The standalone health insurance market in India is likely to grow at a compounded annual growth rate of 30 percent in an accelerated growth scenario for the next five years. According to research by specialist research and consulting firm Fintelekt, the size of the market will increase from Rs 5859.7 crore in FY16-17 to Rs 21,904 crore by FY21-22.
The report, shared exclusively with Moneycontrol, said that even as strong drivers for health insurance are likely to ensure a steady demand for the industry in the coming years, the ability of standalone health insurance companies to leverage the demand will depend on alignment along a number of key parameters including strong multi-channel distribution set-up providing access to a large and diversified customer base.
Further, it said that it will be crucial to manage profitability which will ensure sustained growth for the company. It also listed parameters such as managing competition from other segments in the insurance industry, life insurance companies, public sector general insurance companies as well as private general insurance companies as a factor to leverage demand.
Competition from new entrants into the standalone health segment, as well as private general insurance segments will also be key. Atleast two new places are stated to enter the non-life insurance space.
“Rising costs of medical care are expected to lead to an increase in demand for health insurance, as well as an opportunity to target higher value policies in terms of the sum assured for health insurance companies,” said the report.
The reasons for low health insurance coverage in India are primarily a lack of awareness and lack of affordability. The report, however, said that with rising disposable incomes, and greater awareness stemming from an increasing focus by the government on social sector insurance schemes, the demand for health insurance is expected to rise in the coming years.
It said that the opportunity for health insurance companies lies in reaching out to a much larger customer base that exists beyond the larger cities in India, as well as to target lower income populations with suitable products.
The government has taken steps to ensure coverage of those below the poverty line in the health insurance schemes. These include the Rashtriya Swasthya Bima Yojana (RSBY), the Rs 30 premium health insurance scheme as well as the Pradhan Mantri Suraksha Bima Yojana (PMSBY) which is a personal accident policy with annual premium of Rs 12.
According to the report, the large coverage of social sector schemes is likely to drive penetration as well as create greater awareness among the uninsured populations about the benefits of health insurance. For health insurance companies participating in rural and social sector schemes, it is likely to open doors to hitherto uninsured sections of the population.
However, it said that the profitability for this sector may be an issue as premium rates are pre-determined and loss ratios have been reportedly high for some of the schemes.