LIC Leverages Brand Power for Health Insurance Growth

State-owned company Life Insurance Corporation of India (LIC) is expected to enter the health insurance industry in 2025 by acquiring a stake in a standalone health insurance entity.  By capitalizing on its existing customer base, the company’s expansion into the health insurance domain could significantly boost its market share in the insurance sector in the country, says GlobalData, a leading data and analytics company.

Health insurance represents the most rapidly expanding segment within India's insurance industry, driven by escalating healthcare expenses and a heightened recognition of the necessity for extensive health coverage. Moreover, health insurance premiums in the country are experiencing an upward trend, driven by the increasing demand for private healthcare services and escalating service costs. This trend is anticipated to persist in 2025, bolstering the expansion of the health insurance segment.

According to GlobalData’s Insurance Database, India’s health insurance industry is expected to grow at a compound annual growth rate (CAGR) of 12.5% from INR1.3 trillion ($15.6 billion) in 2024 to INR2.1 trillion ($25.3 billion) in 2028, in terms of gross written premiums (GWP).

Manogna Vangari, Insurance Analyst at GlobalData, comments: “By acquiring a stake in a private, independent health insurance firm, LIC seeks to establish a strong foothold in the nation's burgeoning health insurance industry. This strategy is consistent with LIC's objective of retaining strategic participation while minimizing the risks inherent in majority ownership.”

Moreover, the government, along with the Insurance Regulatory and Development Authority of India (IRDAI) is keen to broaden the scope of health insurance, targeting universal coverage by 2047. The entry of LIC into the health insurance arena is anticipated to significantly contribute to this initiative, given the corporation's robust brand recognition and its expansive sales force, which exceeds 1.3 million agents.

Vangari adds: “This strategic acquisition move of LIC is expected to be particularly fortuitous over the next five years, thereby increasing its market share over its competitors.”

Currently, there are seven standalone health insurance companies operating in the Indian health insurance market: Star Health & Allied Insurance, Niva Bupa Health Insurance, Care Health Insurance, Aditya Birla Health Insurance, ManipalCigna Health Insurance, Narayana Health Insurance, and Galaxy Health Insurance. Several other companies providing life and general insurance policies also provide health insurance.

Vangari continues: “LIC possesses a competitive edge over its private-sector counterparts, boasting a superior Claim Settlement Ratio (CSR). This metric is a critical indicator of an insurer's credibility and reliability. A higher CSR signifies that the insurance company settles claims promptly.”

According to the General Insurance Council ((GI Council), New India Assurance, Star Health & Allied Insurance, and Oriental Insurance Company emerged as market leaders in the health insurance industry during April-September 2024. 

Vangari concludes: “The expected acquisition presents a strategic opportunity for LIC to redefine its role in the health insurance industry. The move presents a substantial prospect for LIC to capitalize on the escalating demand in health insurance, which is also expected to have a positive influence on its life insurance business.”