Mumbai: The retail health insurance segment has the potential to become a $25-billion market in the next five years from the current $4 billion with pure health insurers expected to be the biggest beneficiaries of this growth, a study conducted by Avendus Capital revealed.
Standalone health insurers have disrupted the health insurance market. Currently, they hold 50 per cent market share in the retail health insurance business due to their singular focus and distribution arbitrage over multi-line insurers.
Health insurance offers a large total addressable market with 56 crore eligible population.
According to the study, a declining growth in auto sales and slow pace of manufacturing activity have reduced motor and fire insurance markets.
Indians spend 55 per cent of their healthcare costs from their pockets, which is one of the highest in the world, where the average out-of-the pocket expenditure for healthcare is 33 per cent.
Only 15 per cent of the in-patient revenue and 0.1 per cent of the out-patient revenue of hospitals was covered by health insurers as against 90 per cent motor insurance adoption by private vehicles.
Standalone health insurers (SAHIs) enjoy a distribution arbitrage over multi-line insurers where one agent can distribute products of one life, one non-life and one standalone health insurer. Retail health which is largely an agency driven product gets large boost from this arbitrage.
Retail health offers 20 per cent return on equity with high growth potential leading to incremental return for investors.
Growth would be driven by change in mix of ageing and young population, inflation in healthcare services, access to better health infrastructure, rising awareness post Covid.
The study said that retail health insurance has historically offered the lowest losses amongst government and group health segments as it offers insurers better pricing power and the ability to curate different products for different set of customers.
Large group health policies which are often bundled along with other commercial risk segments tend to operate at loss ratios of 95-100 per cent.
