LIC is considering foraying into health insurance and considering acquisitions

The government-owned Life Insurance Corporation (LIC) is considering entry into the health insurance sector and is currently considering potential acquisition options, according to reports in The Times of India quoting LIC chairman Siddhartha Mohanty. This decision is in line with the proposal to allow compound insurance companies to operate in this sector.

Opportunities in the health insurance sector

“We anticipate the possibility of permitting licenses submitted by the new government and have done preliminary preparatory work. While we may lack expertise in general insurance, we have an interest in health insurance and are exploring growth opportunities through acquisitions,” said LIC CEO Siddhartha Mohanty.

In February 2024, a parliamentary committee recommended the adoption of compound insurance licensing to reduce costs and regulatory burdens for insurers. Currently, insurance companies are limited to offering extended health insurance benefits. Enabling life insurers to cover hospital and indemnity care would require an amendment to the Insurance Act.

LIC’s entry into health insurance is expected to expand coverage.

The Indian insurance market remains largely underpenetrated, with less than 2.3 crore health insurance policies issued by the end of 2022-23, covering approximately 55 crore people. Government-sponsored initiatives have covered nearly 30 crore people, while group insurance has covered nearly 20 crore. Both the government and regulators are in favor of increasing the number of health insurance policies issued, with the potential entry of LICs expected to accelerate the growth of the sector. According to Irdai data, life insurers issued less than 2.9 lakh new policies in FY23, covering nearly 3 lakh lives.

LIC Q4 results

Insurance giant LIC reported a modest 2% rise in net profit to Rs 13,763 crore in the fourth quarter ended March 2024 as the corporation made provisions for salary hikes.

A year earlier, the insurer had posted a profit of Rs 13,428 crore in the corresponding quarter.

Total income for the reporting quarter rose to Rs 2,50,923 crore from Rs 2,00,185 crore in the same period of the previous fiscal, as per LIC filings.

First-year premium income increased to Rs 13,810 crore in the last January-March quarter as against Rs 12,811 crore in the same period of the previous financial year.

Renewal premiums also increased to Rs 77,368 crore from Rs 76,009 crore a year ago.

For the full financial year ended March 2024, LIC posted a profit of Rs 40,676 crore as against Rs 36,397 crore in the previous financial year.

Total premium income for the year ended March 2024 was Rs 4,75,070 crore as against Rs 4,74,005 crore for the year ended March 2023.

A total of 2,03,92,973 policies were sold in the individual segment in FY2024 compared to 2,04,28,937 policies in the previous financial year.

The board has recommended a final dividend of Rs 6 per share for 2023-24, subject to shareholder approval, the LIC chairman said.

“Last year we focused on making directional changes to our product range and increasing margins in the business. We have more than doubled our share of non-standard activities within our individual business. We now intend to focus our strategic interventions to maximize our market share across categories,” Mohanty said.