Health insurance next for LIC? The top boss says the insurer may consider takeovers

The National Life Insurance Corporation (LIC) is considering entering the health insurance segment under a proposal to allow compound insurance companies to operate in the sector.

LIC CEO Siddhartha Mohanty said the insurer has done some internal groundwork and is looking at inorganic growth options. As per a TOI report, LIC may also explore the business scope through acquisitions.

In February 2024, a parliamentary panel proposed licensing for composite insurance to reduce costs and make it easier for insurers to comply with the regulations. Currently, companies can only offer long-term health insurance benefits; providing hospitalization and compensation insurance would require an amendment to the Insurance Act.

The Indian insurance market is underpenetrated. By the end of 2022-23, less than 2.3 crore health insurance policies covering 55 crore lives have been issued. Government-sponsored schemes covered nearly ₹30 crore, while group insurance covered nearly ₹20 crore.

The government and regulators aim to increase health insurance coverage and the entry of LIC is expected to fuel the growth. IRDAI data shows that life insurers issued 2.9 lakh new policies in FY23, covering nearly 3 lakh lives.

State-owned insurer LIC reported better-than-expected Q4 2024 results, reinforcing the long-term positive sentiment among brokerages.

JPMorgan analysts maintained an “overweight” rating with a price target of Rs 1,340 per share, suggesting an upside of 29%. “LIC shares are cheap and have high growth potential. The key catalyst is market share growth,” they noted.

Citi analysts have issued a buy call with a target price of Rs 1,295 per share, indicating an upside of 25%. They are awaiting further clarification on the changes between market valuation and base built value in FY24.