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India's retail health insurance could be a $25 bn market in 5 yrs: Report

Avendus Capital study says low penetration coupled with rising disposable incomes, and product innovation by insurers could act as catalysts for the segment

Health Insurance | Avendus Capital | non life insurance companies

BS Reporter  |  Mumbai 

Life insurance
Photo: Shutterstock

Buoyed by the Covid-19 pandemic and the increased awareness about protection, India’s retail segment could possibly become a $25 billion market in the next five years, said a report produced by .

Health insurance, which has been driving growth in the non-life market, became the largest business segment for non-life insurers in FY22. Low penetration coupled with rising disposable incomes, and product innovation being undertaken by insurers, could act as catalysts for the retail segment, giving it a clear runway for growth in the coming years.

According to the report, “…the segment has the potential to catapult to $25 billion in next five years. In addition to this, the ability to generate consistently high profits and return on equity of over 20 per cent would account for sustained investor appetite due to limited opportunities in companies which focus purely on the retail health segment”.

There are many reasons why is exhibiting such potential. For starters, the segment has a huge head room for growth. Also, declining auto sales growth and slow pace of manufacturing activity makes motor and fire have smaller addressable markets.

Further, Indians pay a huge chunk of their healthcare costs from their pockets as they do not have adequate health cover. This could see a change with rise in disposable income and corporate profits because this would then increase the target market of insurers and make insurance more affordable for consumers, the report said.

Also, looking at the growth potential, a number of private equity players have increasingly started investing in the health insurance companies, which gives these companies the much-needed firepower to invest in innovation and distribution.

“Retail Health Insurance will continue to be one of the most exciting segments within the overall non-Life Insurance space. Its unique characteristics such as high persistency of 90 per cent, pricing power, relatively low loss ratio and headroom for growth due to low penetration would see significant investments being done in this space to capture incremental market share”, said Anshul Agarwal, MD & Co-head, Consumer, Financial Institutions Group (FIG) & Business Services, .

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First Published: Wed, January 25 2023. 17:56 IST