A health insurance sector report has revealed that standalone health players are best placed to capitalise on the profitable individual health opportunity through aggressive agency distribution, bancassurance arbitrage and a focus on product innovation.
The report by Kotak securities mentions that healthcare expenditure in India increased at 12% CAGR between 2015-2020 to over INR8tn ($109bn) and is expected to grow at over 13% CAGR over the next decade aided by increasing urbanisation, improving affordability, high medical inflation, availability of better medical infrastructure coupled with the rise of non-communicable diseases. The share of out-of-pocket expenditure in the country to overall healthcare expenditure is higher than that of most developed countries at over 60%. Increasing awareness about underinsurance, product diversification and innovation, and strong distribution push by private/standalone health insurance players drives over 21% CAGR in individual health insurance.
Individual agents dominate distribution mix
Individual agents originate over 75% of overall individual health insurance while the share of bancassurance is low at less than 10%. The wide range of products, different offerings, features and value-added benefits necessitate assisted sales. Bancassurance remains low but presents a huge opportunity as most banks are yet to opt for open architecture. Web-aggregators occupy a small share of 2.4% in FY2020, up from 0.4% in FY2017. However, the ease of comparing products and policies and purchasing them via aggregator portals presents a strong case for the growth of this channel among tech savvy customers. The individual agency channel should remain important to drive growth in smaller cities. Most health insurance companies continue to widen their agent network even with commission rates steadily increasing over the past few years; the commission rates for this channel are higher than that of others.
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