Anuradha SenGupta: Anand, good to have you on Life After Listing. What has this last year been like? There is a very definite pivot that happens in the life of a company when it goes public, isn't it? How would you describe the past year?
Anand Roy: First of all, thank you for having me on your show. It's a great honour to be here.
Anuradha SenGupta: Thank you, Anand.
Anand Roy: I would say that the last one year after the listing has been extremely exciting for us for two reasons. We are the only standalone health insurance company in the country to get listed. There was no business of this kind in the public domain earlier.
Not only the company, but also the market, the investors are learning a lot about the health insurance business. In that context, it has been a great experience. We are probably the only health insurance company in the world which got listed during a pandemic, and it has been a turbulent time because of that.
There were many issues to manage. By the time we got listed, the Omicron variant was on the rise, and the listing wasn't as successful as we wanted it to be. That was a bit of a challenge.
But now, as we speak, when we are slowly coming out of this pandemic, we are seeing that business is coming back to normal. I'm also able to see that analysts and investors are gaining confidence in our business model, about our direction. So it’s been a bittersweet experience over the last one year since going public.
Anuradha SenGupta:
You are the largest private standalone health insurance provider. To what would you attribute your market share. And also the fact that you have grown, where at least four or five of your peers have shrunk?
Anand Roy:
The success of Star Health is due to two things. One is the trust factor that we have been able to gain in the market. When we launched 15 years back, we were a n actual start-up. We didn't have any bank or large corporate group backing us. Our chairman, Mr. Jagannathan, started the company, got professionals on board, and we built the business over the years. We believe in providing good service, both to customers, and to our distributors.
Second, we are a company that has products for all segments of the society. We cater to all income segments, age segments, disease segments, and geographies. We are not only focussed on urban areas, but also on semi-urban and rural areas.
There is a very strong strategy behind the whole piece. I think we have created a model which is very unique, and we believe that will help us to grow.
Anuradha SenGupta:
I believe life insurance companies will now be allowed to offer health insurance also. What changes will that bring about in the competitive landscape you think?
Anand Roy:
Health is a very competitive business. There are about 25 firms offering all kinds of health insurance products. So, life insurance companies coming in will not change the market dynamics in a very big way, according to me. Probably there may be some new products, new services they will bring into the fold.
But as of today these are only discussions in the media. The regulator has not laid down any draft guidelines calling for views on this. This is not yet a direction the regulator is moving in. We will see how it goes.
As far as our business is concerned, we are very confident because we have a very granular distribution across the market. We don't depend on any particular bank or channel to generate the bulk of our business.
Anuradha SenGupta:
It's agents.
Anand Roy:
Yes. We have 5,50,000 agents who market our products across the country. We do not expect any major disruption if a new competitor comes in, whether it's a life insurance firm or any other player for that matter.
Anuradha SenGupta:
Please tell us about your rural distribution that you launched last year. Until then you were concentrated in the cities.
Anand Roy:
Yes.
Anuradha SenGupta:
What prompted that and how has that experience been? And what are some of the insights as a result of that outreach?
Anand Roy:
After the outbreak of the pandemic we saw a lot of demand coming in from the semi-urban and rural markets. Though we had some presence, we did not have a very established distribution there. So we thought that that's the right place to go into now.
We have created a new vertical focussed on the rural segment. We have opened about 200 new rural offices. We have about 300-odd agents, the spokes of our hub-and-spoke distribution model. They are the distribution points.
When I say rural, I'm actually speaking of small towns and villages with a population of less than 50,000. No insurance company has ventured into these areas yet.
Our initial learning is that the aspirations of the rural market are very high, almost equal to the urban market. We are also looking at rural as a more digital market. More technology driven, not asset-heavy.
Anuradha SenGupta:
What does that mean?
Anand Roy:
It means that we will not have too many offices. We will have manpower, who will be empowered with what we call a virtual office. They will have tablets and can do everything on the tablet.
Anuradha SenGupta:
You mentioned that you have innovated different kinds of products and policies. How do you arrive at those? What is the research that goes into this, what insights do you mine? How do you measure whether those products are successful or not?
Anand Roy:
Great question. See, the composition of Star Health Management is very eclectic. Our chairman comes from a public sector background. I have joined from the private sector. I have colleagues with a medical background. The kind of expertise that we have in this company is very different from what is available elsewhere.
Ever since we started operations, we were clear that we did not want to tread the same old path. We wanted to push the boundaries of health insurance and bring more people into the fold. One of our first innovative products was Star Senior Citizen Red Carpet, where we were offering a product for senior citizens for the first time in the country, whereby a person between 60 and 75 could buy health insurance.
That's one of our most successful products. When we started, obviously there was not much data. We went more by gut feel and experience. But now that 15 years have gone by, we have a lot of data, a lot of analytics. Based on that, we design our products.
We have introduced products covering high-risk disease segments, which nobody else offered. We have a product for cancer care, which covers people already diagnosed with cancer. That's one of the most unique products not only in this market but all of southeast Asia, because nobody offers health insurance to someone with cancer.
Anuradha SenGupta:
That sounds very good, but how do you make business sense of this?
Anand Roy:
We are a for-profit firm. We review our products frequently to see if any changes need to be made. The regulator has made it easier to make product changes now.
Obviously, these are niche products. The volumes will not be very high, but even then you're touching society in a way nobody has been able to, giving them the confidence and support that they lacked. All our products are profitable. We do not make losses on any of these disease-specific products, nor on the senior citizen plan.
Anuradha SenGupta:
What do you make of some of the big changes that are being talked about? And how do you see that affecting Star Health?
Anand Roy:
The regulator is extremely dynamic, and all the changes they are speaking of are good for the industry. For example, now, insurance companies are free to launch a new product, or re-price an existing product as they deem fit. Earlier it used to take a lot of time to get an approval to launch a product. The regulator has moved from a rule-based to a principle-based process. They provide the guardrails and we work within them.
In that context, there are a couple of important changes in the pipeline which I believe will be positive for the industry. Insurance companies today have various expense limits. For example, we have commission limits for agents, brokers, and other partners. Plus, we have other expense limits . Now the regulator is saying we will give you one headline limit and it's up to you how you manage within that. That's extremely positive.
Other than that, we have seen the regulator is talking about a lot of technology-led initiatives. They're talking about a platform where all insurance companies and intermediaries can list their products. Bima Sugam, it is called. I think that is also something very exciting.
Anuradha SenGupta:
Given that the impact of the pandemic seems to be wearing off, how do you see the next year?
Anand Roy:
Quarter one of this financial year has been very good for us and we believe we are getting back to pre-Covid levels.
Anuradha SenGupta:
It was profitable, wasn’t it?
Anand Roy:
Yes, it was profitable. The last two years were very challenging. But this year it's coming back to some kind of normalcy. See, Star Health's business model is a proven one. We have been a profitable company prior to 2020. That's when the pandemic happened, and all insurance companies took a hit, including us.
So this year is looking good and we are confident that we will be able to operate in a profitable manner. The company is extremely focused on the bottom line. We are not in business for only the topline. At the same time, how do we acquire more and more customers? That's one of the important things we’re always working on.
Anuradha SenGupta:
When you look at Star Health’s journey since 2006, would you say that going public in 2021 was a big pivot for the company? What has the past year been like for you?
Mr. Jagannathan:
When I started this, I had my promoters. Then when it was listed, I had my investors, whoever had invested in my shares.
Your responsibility always expands. When responsibility expands, you have to be very careful about your systems and processes, and how you deliver to three sets of people: your employees, promoters, and investors.
I also have a responsibility towards the nation and to my fellow Indians. I have to explain the importance of insurance to them.
If you see our progress, we have more than 200 rural branches. I for one believe India lives in her villages. The economy is going to pick up due to strong agricultural growth.
Anuradha SenGupta:
The value of the company’s shares has disappointed investors since it went public. Do you attribute that to the past two years of the pandemic that we have had to weather, or is it something beyond that?
Mr. Jagannathan:
I am not concerned about market capitalisation because that is dependent on various factors. Why has ICICI Bank or any other good company’s valuation gone down today?
The company is rock solid. My promoters have not sold anything. As far as my employees are concerned, even during Covid I have not failed to pay them. We have recently released the increments. I have not retrenched.
Two years was bad. It is as if you were in the midst of a tempest. But we survived. Normally, we would have paid out Rs. 6,000 crore in claims. We paid Rs. 8,000 crore last year. But it's all right. We made a profit in the first quarter this year.
Anuradha SenGupta:
What is one message you would like to give to the retail investor?
Mr. Jagannathan:
After listing at Rs. 900, our stock went down to Rs. 500. But today we are trading Rs. 700+. I think retail investors will be with us for the long haul.
Anuradha SenGupta:
What did Rakesh Jhunjhunwala’s support and investment in your company mean to you?
Mr. Jagannathan:
You cannot make another Rakesh. He was an outstanding person. He never asked you for anything.
Anuradha SenGupta:
Do you remember your first meeting with him?
Mr. Jagannathan:
Yes, I remember first meeting him five years back, when he wanted to acquire this company. He used to tell me only one thing, "Jagannathan, we believe in the management team. We leave it to them."
He was not even on our board, except for a brief period. I feel very sad. It's a big loss. But Star Health will continue its journey. It is on a strong footing and our boys are very capable. You can see all the young smiling faces, other than mine, of course.
Anuradha SenGupta:
Dr. Prakash, we are in the Star Health Claim's office. This is the heart of the business, right?
Dr. Prakash:
Yeah, of course. The heart of insurance is servicing, and this is where all the service-related operations happen. Here, we honour the promises and pledges we make to our customers. At the end of the day, our customers only buy a contract. So when there is a need and they’re in the hospital, we should be able to deliver. I think close to 1,000 people work in this building. All of them are focused on offering the best to our customers.
Anuradha SenGupta:
You have a network of about 13,500 hospitals across India? How important is it to have pre-agreed pricing and packages? How critical is that to business?
Dr. Prakash:
One of the common gripes about health insurance firms is the quality of empanelment. There were a lot of intermediaries and empanelment was not happening in a transparent way. We want to make empanelment easy for hospitals. We have built an online empanelment process where there is no need of an intermediary. They can open our website, and apply online. There is a Star Health helpline. We look at the papers and see the category of the hospital, how much we can pay for a procedure, whether the hospital is equipped to handle certain treatments. We see all of that and then fix the price.
Anuradha SenGupta:
What were the two years of the pandemic like?
Dr. Prakash:
During the pandemic, our focus was on business continuity, we were not doing any fresh empanelment. We were focussed on paying the hospitals on time, because they need the money. They need money to buy oxygen cylinders, pay the staff, etc.
There was no clarity on the line of treatment. Some doctors were prescribing antivirals, some were giving steroids. Was admission required? Ward or ICU? So many ambiguities were there.
Anuradha SenGupta:
They were all evolving, isn't it?
Dr. Prakash:
Yes. Apart from servicing customers, we were educating hospitals on the guidelines. Given the condition of hospitals in India, if things are to improve, insurers may need to take the lead and initiate the process.
Anuradha SenGupta:
There is this belief that medical services are very expensive. And that they’re marked up because the insurance firm is paying.
Dr. Prakash:
It was common, but we are trying to fix it. We are telling hospitals not to have differential pricing for the insured and the uninsured. Prudent claims adjudication and proper pricing can help health insurance firms be financially viable.
Anuradha SenGupta:
Two years of the pandemic resulted in losses for insurance companies. I believe you’re expecting your claim ratio to go back to about 60 percent from about 80 percent during the pandemic. How are you moving in that direction?
Dr. Prakash:
Health insurance outgo depends on two factors: how many of the insured are hospitalised. And the average claim value.
During the pandemic, we saw an unprecedented increase in the number of claims. The average claim value was 3-4 times more than what we normally pay for an infectious disease like malaria, viral fever, etc.
But I do not consider it a loss. I look upon it as an investment because we were with our customers at a time of crisis, and we ensured business continuity. My customers recognise that and I'm getting 93 percent renewals.
A short answer to your question — our costs have not yet reached pre-pandemic levels. It is a few percentage points more than that. Indeed, that’s true for the industry as a whole.
Anuradha SenGupta:
Did Covid galvanise people into considering health insurance seriously?
Dr. Prakash:
We thought it would, but that is not the case. We are not able to see an acceleration in growth.
But there is a hyper-awareness due to which customers seek hospitalisation even for minor ailments . That is showing up as an increase in infectious diseases. Also, people are developing complications post Covid and getting hospitalised again. This is what we are seeing post the pandemic.
Anuradha SenGupta:
All insurance companies grapple with fraud. What has been your experience?
Dr. Prakash:
See, fraud can happen from the hospital’s side, from the customer's side, and from within our own sales team or service teams. With our experience of handling more than 80 lakh claims, we are creating a rule-based engine for fraud detection.
We are trying to see whether there is impersonation, whether a patient is admitted in a particular ICU, or were certain drugs and investigations at all necessary?
All the common fraudulent practices have been fed into the rule engine, and all claims pass through it now. The triggers are given, and if fraud is suspected, the system flashes a notification alerting the adjudicators, the people who process the claims. Star Health has identified a number of people who have deviated from the norm, and backed it up with documentary evidence.
Anuradha SenGupta:
We are almost halfway through the current financial year. What is this year looking like so far?
Dr. Prakash:
Every year has its own challenges. This year we’re seeing a lot of infectious diseases due to the extended monsoon. But we are confident that with the systems and processes we have in place, we have this covered.
Anuradha SenGupta:
Lovely talking to you, Dr. Prakash.
Dr. Prakash:
Thank you so much.
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