Compelling small business model in a beckoning sector: Star Health and Allied Insurance (STAR), incorporated in 2006, is the biggest private well being insurer in India, with market place share of 15.8% and gross written premium (GWP) of Rs 93.5b in FY21.
In FY21, the retail well being GWP for STAR was more than 3x the retail well being GWP of the next highest retail well being insurance coverage market place participant. It has market place share of 31% in the retail well being segment.
During FY18–21, STAR outperformed the sector in premium development, with 31.4%/ 32.4%/ 35.3%/ 8.5% development in Total Premium / Retail Health / Group Health / Personal Accident.
Individual agents account for 78%+ of its premium collections, and at .43m agents, it boasts the highest count of agents amongst the standalone well being insurers (SAHIs). It has a network of 737 branches (pan-India presence) and tieups with 90+ corporate agents.
Its combined ratio has been amongst the ideal in the sector at 92–94%, except in FY21, which was impacted by numerous one-offs. Its expense ratio saw constant decline to 19.6% in FY21 from 26.9% in FY18.
Retail Health Insurance — a huge chance: The Health Insurance sector is poised to see a CAGR of 18%/23%/15%/11% in the Total/ Retail/ Group/ Government segment more than FY21–25E (CRISIL estimates). Stark beneath-penetration would be the key driver of the very same.
Currently, only 3% of the population is covered beneath retail well being insurance coverage plans. With government and corporate schemes, the coverage increases to 37% of the population. Relative to other key economies, well being insurance coverage premium as a percentage of GDP (.36%), density ($5), and out-of-pocket well being expenditure (63%), India is worse off. Furthermore, the Covid-19 pandemic produced a pull for well being insurance coverage demand, reflected in 28%/ 25% development in retail well being insurance coverage premiums in FY21/4MFY22. Growth was driven by 1) a surge in the quantity of folks subscribing for well being insurance coverage, 2) an improve in the sum assured by current clients, and 3) value hikes implemented by providers in the previous fiscal.
Key dangers: While the Covid-19 pandemic did outcome in a pull for demand for well being insurance coverage, it also led to a larger claims ratio. Therefore, a third Covid wave may perhaps prove detrimental to earnings provided the severity of Covid-19 claims is 2x non-Covid claims. Increased competitors from multi-line common insurers may perhaps pose a danger to development for STAR. The extension of the coverage of government schemes, such as Ayushman Bharat, to these beyond the BPL category may perhaps slow the sector development price.