Coming up: Regional health insurers

Insurance amendment Bill proposes to reduce minimum capital to Rs 50 cr. This could enable smaller firms enter the sector and be regional players

Health insurers offering services only in specific regions of the country could soon be a reality. The Insurance Laws (Amendment) Bill, if passed, will reduce minimum capital for a health insurer at Rs 50 crore compared with Rs 100 crore at present. According to regulatory officials, this would attract companies that want to be regional players.

The Insurance Bill is expected to be tabled and passed in Parliament in the winter session. The Bill, which proposes to increase foreign direct investment (FDI) from 26 per cent to 49 per cent, is likely to give a big boost to health insurance penetration in the country.

For one, the Bill proposes a reduction in the capital requirement for health insurance companies. This is expected to reduce the entry barrier, especially for smaller firms that want to come in to sector.

The insurance amendment Bill seeks to amend the Insurance Act, 1938, the General Insurance Business (Nationalisation) Act, 1972, and the Insurance Regulatory and Development Authority Act, 1999.

A senior official with the Insurance Regulatory and Development Authority (Irda) said that many companies are waiting to enter the health insurance space as standalone health insurers, once the Bill is passed.

"They are interested in becoming regional health insurers, similar to the structure that you have in the banking system. We (regulator) will not have a problem if a prospective company wants to operate only in a particular geography, provided they serve that segment well," the official said.

The banking system has regional rural banks that were set up with a view to developing the rural economy. This was also to create a supplementary channel to the 'cooperative credit structure' to increase institutional credit for the rural as well as agriculture sector.

Currently, a standalone health insurer offers products to individuals and corporates across the country. Some also take part in government-sponsored health insurance schemes such as Rashtriya Swasthya Bima Yojana.

There are at the moment five stand-alone health insurers in India. They are Star Health and Allied Insurance, Max Bupa Health Insurance, Religare Health Insurance, Apollo Munich Health Insurance, and CignaTTK Health Insurance.

Besides, corporates such as Reliance Capital and Aditya Birla Financial Services Group are also exploring the possibility of setting up separate health insurance companies.

All health insurers do not have presence across the country, a senior general insurance executive noted. "It is sensible to have regional health insurers so that there can be comprehensive coverage in specific areas, to ensure better reach and quality of services."

General insurers collected health premia worth Rs 17,624 crore in FY14 against Rs 15,530 crore in FY13. This is expected to cross Rs 20,000 crore in the current financial year.

According to industry executives, a large part of the north-east and hilly terrain do not have a wide coverage of health insurance and if companies concentrate on offering services to these specific regions, it would be beneficial for the sector.

Regulatory officials say some firms have expressed interest to operate only in some pockets where they have expertise and offer a whole bouquet of products there. Since this would enable deeper penetration in these markets, the regulator is expected to support these firms in their endeavour.

If regional health insurers become a reality, consumers would get a wider choice and insurance pricing would also become competitive, especially in the retail health space.

According to experts, specialised niche products could be offered by these companies in non-metro towns, according to the needs of the people.

General insurance penetration is below one per cent of India's gross domestic product, according to a Swiss Re sigma study. Only 20-30 per cent of the country's population are estimated to have a health insurance policy.