More than 250 million Indians could have heath insurance policies by 2028

Retail health insurance market to touch close to $25 billion

India’s health insurance segment could expand to cover 250 million individuals under retail and corporate health insurance policies over the next five years, a study conducted by Avendus Capital has said.

In terms of size, the retail health insurance segment has the potential to become a $25 billion-market in the next five years. This figure does not include government-driven health insurance schemes such as Ayushman Bharat.

Low penetration, coupled with COVID-induced rise in awareness, product innovation and rising disposable income are the key reasons why the investment banking firm expects the retail health segment to grow multifold.

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“Even on the group health insurance side, the average cover is Rs 5 lakh. One of the realisations for people post-COVID-19 is that whatever insurance they have is not enough as the expenditure is much higher. They will gravitate towards larger covers of Rs 10-15 lakh,” said Anshul Agarwal, Managing Director and Co-head, Consumer, Financial Institutions Group (FIG)and Business Services, Avendus Capital.

The retail health segment could also outdo traditional motor and fire insurance portfolios. With 45 percent of India’s relevant population devoid of any health coverage, this (retail health insurance) segment is expected to be the leader among other non-life segments,” noted the report.

According to Avendus estimates, only 60 million individuals are covered under retail or corporate health insurance.

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Rising medical costs and awareness key drivers for retail growth

Also, just about 15 percent of the hospitals’ total in-patient (hospitalisation) and 0.1 percent of the out-patient revenue (doctor’s consultation and treatment without hospitalisation) is covered by health insurers today.

These factors put together present a huge growth potential for the sector as the total addressable market is large at 560 million eligible population. Even existing health insurance schemes have the potential to cover 450 million relevant eligible individuals who are not covered under any insurance cover till now or aren’t eligible for government insurance schemes

“Rising medical costs, increasing healthcare spend and rising awareness are key growth drivers for health insurance,” the study said. India’s total healthcare spend accounts for 3.6 percent of Gross Domestic Product (GDP) and public healthcare spend is at 1.3 percent.

This is lower than Organisation for Economic Co-operation and Development (OECD) average of 8.8 percent. “(this) is expected to triple in the next ten years. Growth in disposable income and corporate profits will act as catalysts in increasing target market of insurers and making insurance more affordable for consumers,” the report said.

Newer products to provide a fillip to health insurance
Wellness features in health insurance products and growing digitisation will work in favour of the segment. “Targeted and curated products, introduction of wellness offerings for comprehensive coverage, digitization across the value chain, focus on new sales channels (direct/online and bancassurance) and increasing medical costs offer tailwinds to health insurance,” the study stated.

Health versus motor and other general insurance segments
General insurance companies will have to lay greater emphasis on health insurance to offset the impact of declining auto sales growth and slow pace of manufacturing activity. The renewal rate in health insurance policies, which are annual contracts, is 90 percent, while it is around 50 percent in the case of motor insurance. Amongst general insurance companies, it’s standalone health insurers who are better poised to make the most of the retail sector’s potential, according to Avendus.