By 2028, more than 250 million Indians could have health insurance policies

According to an Avendus Capital analysis, India's health insurance industry might grow to cover 250 million people under retail and corporate health insurance policies over the next five years.

The retail health insurance segment has the potential to grow to a $25 billion market in the next five years. This figure excludes government-sponsored health insurance programmes.

Low penetration, along with a COVID-induced increase in awareness, product innovation, and increased disposable income, are the primary reasons why the investment banking business forecasts the retail health segment to grow by a factor of ten.

"Even on the group health insurance side, the average cover is Rs 5 lakh. One of the realisations for people following COVID-19 is that whatever insurance they have is insufficient because the costs are substantially greater. "They will gravitate for greater coverage of Rs 10-15 lakh," Anshul Agarwal, Managing Director and Co-head, Consumer, Financial Institutions Group (FIG), and Business Services, Avendus Capital, said.

Retail health insurance portfolios may also outperform classic auto and fire insurance portfolios. With 45 percent of India's relevant population lacking health coverage, this (retail health insurance) category is likely to dominate other non-life segments, according to the report.

According to Avendus projections, just 60 million people have retail or business health insurance.

Rising medical costs and increased awareness are significant drivers of retail expansion.

In addition, health insurers currently cover just around 15% of total in-patient (hospitalisation) revenue and 0.1 percent of out-patient revenue (doctor's consultation and treatment without hospitalisation).

These elements, when combined, represent a massive growth opportunity for the sector, as the overall addressable market is big, with 560 million eligible people. Existing health insurance plans have the potential to cover 450 million relevant eligible individuals who are currently uninsured or ineligible for government insurance schemes.

"Increased medical expenditures, expanding healthcare expenditure, and rising awareness are significant growth drivers for health insurance," according to the survey. Total healthcare spending in India stands for 3.6 percent of GDP, with public healthcare spending accounting for 1.3 percent.

This is less than the 8.8 percent average for the Organization for Economic Cooperation and Development (OECD). "(This) is predicted to quadruple during the next ten years. Growth in disposable income and corporate earnings will function as catalysts in expanding insurers' target markets and making insurance more cheap for consumers, according to the paper.

Newer goods to give a boost to health insurance

Wellness aspects in health insurance plans, as well as increasing digitalisation, will benefit the segment. "Targeted and curated products, the introduction of wellness offerings for comprehensive coverage, digitization across the value chain, a focus on new sales channels (direct/online and bancassurance), and rising medical expenditures all provide tailwinds for health insurance," according to the report.

Health insurance against auto insurance and other types of general insurance

To offset the impact of diminishing vehicle sales growth and a slow pace of manufacturing development, general insurance companies will need to place a stronger emphasis on health insurance. The renewal rate for health insurance policies, which are annual contracts, is 90%, whereas it is roughly 50% for auto insurance. According to Avendus, standalone health insurers are more positioned to capitalise on the retail sector's potential than general insurance companies.