The country’s largest life insurance provider Life Insurance Corporation of India (LIC) is planning to enter the health insurance market. This strategic move involves acquiring a substantial stake in government-backed insurance provider ManipalCigna Health Insurance. With this potential deal, LIC aims to diversify its portfolio and expand its footprint in the growing health insurance sector. But what is LIC’s exact plan, how important is this deal and what impact will it create in the insurance landscape? Let’s take a deeper look at the implications of this unprecedented development.
The Deal: LIC’s Stake in ManipalCigna Health Insurance
Bengaluru-based ManipalCigna Health Insurance Company is a joint venture between the Manipal Education and Medical Group (holding a 51% stake) and the U.S.-based Cigna Corporation (holding a 49% stake). As per an ET report, LIC is in talks to acquire a 50% stake in this health insurance company. Both existing shareholders will reduce their stakes in this deal.
Based on the existing business, the total value of ManipalCigna Health Insurance is estimated to be ₹4,000 crores. This means LIC would need to invest ₹2,000 crores to secure a 50% stake. This acquisition aligns with the government’s ambitious target of providing access to all types of insurance for every household by 2047.
Currently, while insurance has strong penetration in urban areas, rural regions remain largely untapped despite vast business opportunities. LIC’s entry into the health insurance sector is expected to bridge this gap significantly.
Also see: LIC Jeevan Tarun Plan 734
Health Insurance: A Growing Market
India’s general insurance sector has registered a growth of 12.7% in FY 2023–24. However, the combined growth of health insurance companies has been even more impressive at over 26%, signaling a rapid expansion in this segment. ManipalCigna Health Insurance, the company LIC is eyeing for a stake, recorded a growth rate of 24.4%, demonstrating its strong performance and market potential.
Currently, the general insurance sector comprises 27 companies offering various types of insurance—auto, property, health, etc., excluding life insurance. Among these, only seven companies, including Aditya Birla Health Insurance, ManipalCigna, Star Health, and Niva Bupa, focus exclusively on health insurance.
Health insurance now holds a substantial 37% share of the ₹3 lakh crore general insurance market. This dominance highlights its rapid growth trajectory compared to other insurance segments, presenting significant opportunities for new entrants like LIC.
Challenges in Rural Areas
Now the question is, what will be the impact of LIC’s entry into the health insurance business? Actually, the insurance companies that are currently selling health cover in the country have a very limited reach. People in remote areas of rural India are not aware of the real benefits of health insurance. Additionally, the distribution network of health insurance companies is limited to cities only.
LIC: A Game Changer for Rural Health Insurance
LIC’s vast network of over 14 lakh agents is its greatest strength. Spread across the remotest parts of India, this network dwarfs the 7.24 lakh agents employed by all general insurance companies combined. According to the data of insurance regulator IRDAI, by the end of October 2024, the country’s life insurance companies collectively had 29.71 lakh agents, highlighting LIC’s dominance in this area.
The demand for health insurance in rural areas is negligible due to limited awareness and the urban-centric distribution networks of general insurers. However, LIC’s agent network extends to the most remote villages, making it uniquely positioned to bridge this gap. If LIC enters the health insurance business, its agents will not only sell policies but also educate people about their benefits. Those who purchase health insurance will receive localized, home-based service from these agents, further bolstering trust and adoption.
Affordable Health Insurance for All
SEBI-registered investment advisor Jitendra Solanki highlights that LIC’s government-backed foray into health insurance is likely to introduce products tailored for every demographic.
He states, “LIC is a big player in this sector. When LIC enters the health insurance business, it will launch new products for every section of society. Due to government support, it will also launch cheap products. This will lead to tough competition in the health insurance sector. Customers will benefit from this competition. Insurance companies may be forced to sell cheap policies with low margins. The biggest benefit will be that the reach of health insurance will increase in the rural sectors of the country, which will help the government in achieving its goal of providing insurance to every household.”
This highlights the significant impact LIC is expected to have on the competition within the sector, potentially leading to lower premiums and greater market accessibility.
Impact on the Health Insurance Sector
- Broader Coverage: LIC’s presence in health insurance will significantly increase policy uptake in rural areas, contributing to the government’s goal of universal insurance coverage.
- Affordable Products: By introducing low-cost health insurance products, LIC can cater to economically weaker sections, fostering inclusivity.
- Increased Awareness: LIC’s agents will play a pivotal role in spreading awareness about health insurance benefits, overcoming traditional barriers in rural India.
- Competition and Innovation: LIC’s entry is expected to spur innovation as competitors strive to differentiate themselves through better products and services.
Meeting Government Targets
The Indian government has set an ambitious target of providing insurance coverage to every household by 2047. LIC’s entry into the health insurance domain aligns seamlessly with this vision. By leveraging its extensive network and market reputation, LIC is well-positioned to bridge the urban-rural insurance divide and accelerate progress toward achieving this goal.
A Catalyst for Transformation
LIC’s potential acquisition of a stake in ManipalCigna Health Insurance is more than a strategic business decision—it represents a transformative step for India’s insurance landscape. By focusing on rural penetration and affordability, LIC can address existing market gaps and revolutionize health insurance delivery in India.
As the deal progresses, stakeholders across the insurance ecosystem are keenly observing LIC’s next steps. If successful, LIC’s health insurance venture could set a precedent for integrating life and health insurance services under one umbrella, further solidifying its role as a leader in India’s insurance sector.
Conclusion
LIC’s move to enter the health insurance sector is a watershed moment for the Indian insurance industry. With its vast agent network, financial resources, and government backing, LIC is poised to redefine health insurance accessibility and affordability, particularly in rural areas. This initiative not only promises to benefit millions of underserved Indians but also sets the stage for robust growth and innovation in the sector.
As LIC prepares to make its health insurance debut, it carries the potential to transform the market, paving the way for a healthier and more financially secure India.
FAQs about LIC’s Entry into the Health Insurance Sector
What is LIC’s plan for entering the health insurance business?
LIC plans to acquire a 50% stake in ManipalCigna Health Insurance, a joint venture between Manipal Group and the U.S.-based Cigna Corporation. This move will enable LIC to expand its services into health insurance.
How will LIC’s entry impact the health insurance sector?
LIC’s extensive agent network and government backing will likely increase competition, reduce policy costs, and expand health insurance access to rural areas, benefiting customers with more affordable and inclusive options.
Why is LIC focusing on rural areas for health insurance?
Rural areas are underserved in terms of health insurance due to high costs, lack of awareness, and limited distribution networks. LIC’s strong presence in villages can help bridge this gap, increasing penetration in these regions.
What benefits will customers gain from LIC’s health insurance?
Customers can expect affordable and customized health insurance plans, better service delivery through LIC’s extensive agent network, and increased awareness of the importance of health coverage.
Will LIC’s agents need additional training to sell health insurance?
Yes, LIC agents, who primarily sell life insurance, will require training to understand and market health insurance products effectively, ensuring they can address customer needs comprehensively.
Disclaimer: This article is based on publicly available information and insights regarding LIC’s potential entry into the health insurance sector. It does not constitute professional advice or an endorsement of any insurance product or service. Readers are advised to consult official sources or financial advisors for accurate and personalized guidance before making any insurance-related decisions.