‘Retail health insurance market can give 20% RoE yearly’
- ByStartupStory | January 25, 2023
According to a research by Avendus Capital, India’s retail health insurance market has the ability to provide an annual return on equity (RoE) of 20% despite a growth in demand for policies among families and individuals following the COVID.
Only individual or family-purchased health insurance policies are covered by the retail health insurance category.
The market size for this sector is expected to reach $25 billion by FY27, up 5.3 times from the $4 billion reported in FY22, according to the research “Retail Health Insurance: A Large Whitespace.”
“In India, the health retail health insurance segment is currently dominated by five standard health insurers (SAHIs): Religare-led Care Health Insurance, Niva (Max) Bupa Health Insurance, Aditya Birla Health Insurance, Star Health and Allied Insurance and ManipalCigna Health Insurance,” the report by the investment banking firm further noted.
According to the study, these firms have significantly attracted both domestic and foreign investors’ attention in the past. They have disrupted the market to gain over 50% of the market share and are anticipated to benefit most from segment expansion.
Aditya Birla Health Insurance, for instance, received Rs 665 crore from the Abu Dhabi Investment Authority (ADIA) last year, while Religare Enterprises Ltd. was seeking Rs 300 for Care Health Insurance through a rights issue.
“SAHIs have established a presence in the retail health segment. Awareness of health insurance post-Covid has acted as a strong catalyst. Given that the distribution of retail health is primarily individual agent driven, SAHIs’ single product focus and distribution arbitrage over multi-line insurers provide them with a competitive advantage,” said Snigdha Khemka, director – consumer, financial institutions group (FIG) and business services, Avendus Capital.
One of the most interesting areas of general insurance, or non-life insurance, for investors will continue to be retail health insurance. According to Anshul Agarwal, managing director and co-head of consumer, FIG, and business services at Avendus Capital, the segment will continue to witness sizable investments because of its strong persistency rate, relatively low loss ratio, and growth potential due to low penetration.
“The ability to generate consistently high profits and RoE of over 20% would account for sustained investor appetite due to limited opportunities in companies which focus purely on the retail health segment,” said Agarwal.
The survey also noted that the retail health insurance industry is anticipated to dominate all other non-life categories because over 45% of India’s relevant population now lacks any kind of health coverage.
In the retail health market, where coverage is anticipated to reach roughly 250 million people, the report cites low penetration (with only 60 million people covered), along with a Covid-led surge in awareness, product innovation, rising disposable income, etc. as some of the key catalysts for growth.
Follow Startup Story
Related Posts
