CARE: Gross direct premium for health insurance to grow at 26%-29% in FY22, segment remains in bright spot amidst Covid blues

According to CARE report, Covid-19 boosted health premia and spiked claims which dented profitability.

December 20, 2021 10:31 IST | India Infoline News Service
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Despite income growth and savings being under pressure, CARE Ratings in its latest research said that the demand for health insurance has historically increased during pandemics. The rating agency sees health insurance in India to remain on a bright spot.

According to CARE, Covid-19 boosted health premia and spiked claims which dented profitability.

Between FY14 and FY21, health insurance has grown rapidly in India at a compounded annual growth rate (CAGR) of 18%. Whereas overall non-life insurance has grown at 14%, consequently, health insurance’s share has grown over 30% and has become the largest segment within non-life insurance in FY22.

In its outlook for health insurance in India, CARE in its note stated that "we expect the gross direct premium for health insurance to grow at approximately 26%-29% in FY22 and is likely to grow at around 16%-18% CAGR over the next five years after FY22."

As per CARE's note, the growth would be driven by increasing life expectancy, urbanisation, income levels, and pandemic-led awareness, a higher number of individuals subscribing to health insurance, existing customers increasing their sum assured, availability of a wide range of products that offer varied health covers, depending on the need for the customers, and possible rate increase considering the increase in claim ratios in FY21 and 1HFY22.

CARE's note highlighted that the longer-term drivers include the fact that health insurance in India is highly underpenetrated and Insurance
density and Health care expenditure as a percentage of GDP is quite low in India as compared to other countries.

Furthermore, CARE said that as the sum insured is indemnity-based, with an increasing portion of customers purchasing higher sum insured policies, the rising claims could impact claim ratios, thereby requiring insurers to maintain adequate solvency margin buffers.  

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