Mumbai: Public sector behemoth Life Insurance Corporation of India (LIC) is eyeing a strategic stake in an existing standalone health insurance company and has ruled out the possibility of using the composite license route to foray in health insurance.
A source in LIC close to the development said, “Composite license has not come in Parliament yet. We don’t need a composite license (to enter health insurance). Even if the amendments come we will not go for a composite license. Instead, we will buy some stake in an existing health insurance company. We will have some say in management decisions but the company will be purely managed by them (promoters of the health insurance company).”
“Health insurance has a lot of potential. Longevity is going up but diseases are also going up. Additionally, medical expenses are also rising, so health insurance has significant potential. If you see the total healthcare expense, less than 3 per cent is covered by health insurance,” said the LIC source.
He highlighted adverse selection, privacy issues, and non-disclosures of medical conditions by customers as a hindrance in pricing risk appropriately.
A parliamentary panel headed by BJP leader Jayant Sinha had recommended that insurance companies be allowed a composite license to offer life and non-life and health insurance products under one entity.
Prospective insurers can even apply for sub-class of business such as accident, health and motor insurance. Current regulations prohibit insurers from selling health, motor and other non-life and life insurance policies to customers through a single entity. To enable composite licensing, the government will have to bring amendments to the existing Insurance Act, 1938 and Insurance Regulatory and Development Authority Act, 1999.
A composite license will allow life insurance companies to sell indemnity-based health insurance products. At present, life insurance companies can sell only fixed benefit health plans which pay a fixed amount following a claim.
