Need to spend more to boost retail health: Niva Bupa CEO & more related News Here

Mumbai: It is cross-subsidisation of loss-making corporate group policies by retail health insurance, rather than high acquisition costs, that is impacting retail insurance penetration, said CEO of Niva Bupa Health Insurance.Krishnan Ramachandran, MD and CEO of Niva Bupa, said insurers need to increase investment to expand retail health insurance and increase their share relative to the group health business, which generally runs on high loss ratios. According to Ramachandran continued investment in distribution and customer acquisition is necessary to add covered lives to a market that is still very under-penetrated.He said customers who remain with the insurer after the initial years get significant value, with claims payouts exceeding Rs 80 for every Rs 100 of premium collected after the initial policy years. “Globally, medical loss ratio of 75-80% is considered fair value,” he said, adding that the mix ratio appears to be low only due to rapid new customer acquisitions, where early year claims are structurally low.The comments come amid a debate sparked by the Economic Survey on high acquisition costs and management expenses in health insurance. Ramachandran argued that such costs are natural for a retail-led market like India, where awareness, advice and physical presence are essential. “If the goal is to increase coverage and add lives, companies must invest upfront,” he said, noting that India has one of the highest proportions of retail health insurance globally but remains largely underpenetrated.According to him, the long-term solution lies in expanding retail health insurance coverage. He said, “Health insurance is an essential thing. This is the biggest reason why Indians are still poor today.”Niva Bupa’s health insurance sales have seen a rise after the GST cut in October. The momentum strengthened from October to December and December’s growth was even better. January is also looking very healthy. “All our Q3 numbers are indicating that GST has been one of the key reasons for the uptick in growth. Q3 volume growth was 29%, while value growth was 15%, which means ticket sizes increased materially in the quarter. This was a sharp improvement compared to the first half and GST clearly played a role in this,” the company said in its earnings call on Friday.Lower drug costs following GST-linked price cuts are helping health insurers mitigate the impact of taxes on input services, which insurers now have to bear as there is no GST on the final product to offset taxes on inputs. However, in case of commission, the burden of GST is completely passed on to the agents. The major hurdle for the industry remains low insurance penetration and the need for constant upfront investment. Speaking on recent regulatory and tax changes, Ramachandran said the impact of GST on insurers should be seen in two separate parts – commission and other input services. “On commission, we are clear and the data has also demonstrated that the commission has been passed,” he said, referring to the input tax credit impact after withdrawal of GST on the final health insurance product from October.On other services, he said the increase in costs due to the company absorbing the cost of GST on services received was offset by savings on the claims side, particularly through lower drug prices. According to Ramachandran, another burden on the retail policyholder was the high claim ratio on group insurance policies. “Public data shows loss ratio in corporate cover exceeds 100%”. In effect, retail policyholders and taxpayers are subsidizing group insurance for large corporates,” he said, calling it an important policy issue.According to him, the long-term solution lies in expanding retail health insurance coverage. He said, “Health insurance is an essential thing. This is the biggest reason why Indians are still poor today.”Ramachandran said insurers need to continue investing heavily to build distribution and service capabilities, even if this means expense ratios remain high in the near term. Niva Bupa has infused capital of around Rs 2,800 crore to build scale in the retail-led market, he said. “Without physical and advisory access, lives will not connect,” he said, drawing parallels with banks opening branches to receive and serve customers.Looking ahead, he said Niva Bupa expects margins to improve over time, supported by disciplined underwriting and claims management, even as technology and AI-led investments continue across the value chain. The challenge for the industry, he said, is to balance near-term costs with the long-term objective of improving insurance access in a market where millions of people are uninsured.