Star Health and Allied Insurance is bullish on future growth prospects. Having grown more than 100% in the last two years, it sees opportunities for pure-play health insurance companies, as the penetration level in India is only 3% to 4%. In an interview with R Ravichandran, Star Health CMD V Jagannathan, dwells on the industry?s perspective and Star Health?s growth prospects in particular. Excerpts:
An overall perspective of health insurance industry in India and its growth prospects?
The health insurance segment is one among the comfortable growth areas, as it holds huge potential in India. When compared to overseas markets, particularly the developed countries, Indian health insurance industry is in a nascent stage and is estimated to be around Rs 4,500 crore to Rs 5,000 crore. It accounts for 20% of the total general insurance industry in India. The industry has been growing at a CAGR of 18% to 20% for the last few years. It is expected to touch Rs 12,000 crore in next five years.
In your view, what are the driving factors and challenges?
One would see growing awareness among the common public, even in the semi-urban and rural areas and the industry is continuously involved in spreading the importance of having health insurance. The middle-income group is finds it difficult to meet the ever increasing hospital costs and has started owing health insurance products to meet their hospital expenditures. It is expected the insurers will penetrate deep into the tier-II, tier-III cities to bring in more people under health insurance. On the other hand, non-cooperation of health service providers (hospitals) is the biggest challenge for the industry. It is because the claims ratio has gone up substantially over a period of time. The average industry claims ratio is estimated to be around 80%- 85%, which is definitely on the higher side.
Can you explain in detail the growth aspects of Star Health?
Being the first standalone health insurance player in India, Star Health?s focus always been on innovating new products and customer services. Given this advantage, Star Health was invited by Andhra Pradesh and Tamil Nadu governments to provide insurance coverage to people under below poverty line and got huge orders from these governments. We are in the third year of our full operations and our portfolio is the highest among private health insurers in India. We expect to end the current financial year with Rs 975 crore business compared with Rs 415 crore last year. It was Rs 228 crore in the year before.
There is a perception that you have achieved this growth primarily due to state governments? orders. Can you clarify?
It is partially true that we have grown to a such level due to the two state governments? order book. But, we have been increasing our market share in the retail segment. As against Rs 90 crore in the previous financial year, Star Health has more than doubled the retail business to Rs 200 crore in the 2009-10 and expect to net Rs 400 crore in 2010-11.
Where do see yourself in the next two years or so?
We expect an aggressive growth over the next two years, we have set a minimum target of Rs 1,500-crore business in 2010-11 and Rs 2,000 crore in the next fiscal. We expect retail business to contribute Rs 800 crore to Rs 1,000 crore.
