Star Health & Allied Insurance Company Ltd Management Discussions

GLOBAL ECONOMY Performance of major economies

World Economic Output (%)

Particulars	2024	2025P	2026E
World Output	2.7	1.8	2.0
Advanced Economies	1.2	0.9	1.2
United States	1.9	1.2	1.1
Euro Area	0.5	0.5	0.9
Japan	0.6	1.0	1.1
United Kingdom	0.0	0.1	0.6
Canada	1.4	0.4	1.6
Other Advanced Economies	1.7	1.4	1.5
Emerging Markets and Developing Economies	3.7	2.7	2.8
Emerging and Developing Asia	4.7	4.0	4.1
China	5.1	4.2	4.2
India	5.5	5.3	5.4
ASEAN-5 (Indonesia, Malaysia, Philippines, Thailand, Vietnam)	3.6	3.0	3.0

Source: International Monetary Fund April 2025 report P: Projected, E: Estimated

OUTLOOK

The global economy is projected to grow steadily, with GDP expected to rise by 1.8% in 2025 and 2.0% in 2026, underpinned by consistent performance across both advanced and emerging markets. Growth in advanced economies is likely to remain moderate, with estimates of 0.9% in 2025 and 1.2% in 2026, shaped by differing domestic demand trends and policy stances. In comparison, emerging markets led by China and India are expected to sustain stronger growth momentum, with forecasts of 2.7% in 2025 and 2.8% in 2026, despite persistent global uncertainties. A key emerging risk stems from escalating trade tensions. The U.S. introduced tariffs on Canada, Mexico, China and several other countries in March 2025, prompting retaliatory actions that could disrupt global trade flows, increase inflationary pressures and slow economic activity. Elevated import costs may push up consumer prices across multiple regions. Nevertheless, economies are expected to demonstrate resilience, supported by technological innovation and well-calibrated policy responses aimed at preserving economic stability.

INDIAN ECONOMY

India continues to rank among the fastest-growing major economies in the world, reflected by favourable demographics, strong domestic demand and ongoing structural reforms. The country is steadily reinforcing its role as a significant global economic player, supported by sustained growth across the manufacturing, infrastructure and technology sectors and healthy GST collections.

However, in the face of elevated global uncertainties and domestic headwinds, Indias GDP growth slowed to 6.5% in FY 2025, down from 9.2% in FY 2024, as per data from the Ministry of Statistics and Programme Implementation (MOSPI). This moderation was largely attributed to a slowdown in manufacturing, rising food inflation, subdued urban consumption, limited formal job creation, a widening trade deficit and sluggish private investment. Despite these challenges, the economy remains on a steady trajectory, supported by strong performance in the services sector, increased public infrastructure spending and government initiatives focussed on digital transformation, financial inclusion and improving the ease of doing business.

Source: https://www.imf.org/en/Publications/WEO/Issues/2025/04/22/world-economic-outlook-april-2025

Indian GDP Growth (%)

Particulars	FY 2023	FY 2024	FY 2025P*	FY 2026E#
Real GDP Growth (%)	7.6	9.2	6.5	6.5

Source: *MOSPI Report dated 28 February, 2025

Reserve Bank of India (RBI) Monetary Policy Committee (MPC) report dated 9 April, 2025 Growth of the Indian economy quarter by quarter FY 2025

Particulars	1Q FY 2025	2Q FY 2025	3Q FY 2025	4Q FY 2025
Real GDP Growth (%)	6.7	5.4	6.2	6.5

Inflation remained a significant concern in FY 2025, driven by global supply chain disruptions and volatility in commodity prices. In response, the Reserve Bank of Indias Monetary Policy Committee (MPC) implemented two repo rate cuts of 25 basis points each, bringing the rate down to 6% as of April 2025 and shifting to an accommodative stance. CPI inflation is expected to average 4.9% in FY 2025, down from 5.4% in FY 2024, with further easing to 4.0% projected for FY 2026.

The fiscal deficit is estimated at 4.8% of GDP for FY 2025 and is projected to moderate to 4.4% in FY 2026. To finance the deficit in FY 2026, net market borrowings through dated securities are expected to amount to Rs. 11.54 lakh crore. The remaining financing needs are anticipated to be met through mobilisation from small savings and other sources. Gross market borrowings for FY 2026 are projected at Rs. 14.82 lakh crore. The current account deficit remained contained at 1.2% of GDP, pointing to stable external fundamentals for FY 2025.

Indias exports hit a record USD 824.9 billion in FY 2025, supported by robust growth in services exports, which rose to USD 387.5 billion. This reflects a 6.01% YoY increase over the previous year, with major contributions from telecommunications and financial services. Merchandise exports rose by 6%, while services exports delivered strong growth of 13.6%, further cementing Indias position as a global leader in services.

Gross Fixed Capital Formation (GFCF), which measures investments in fixed assets such as infrastructure, machinery and equipment, has remained relatively stable as a share of GDP over the past three fiscal years. The GFCF-to-GDP ratio stood at 33.6% in FY 2023, eased slightly to 33.5% in FY 2024 and is estimated at 33.4% for FY 2025. This consistent signals a continued commitment to long-term investment and capacity building, even amid global challenges. It also reflects ongoing momentum in infrastructure expansion and private sector investment, both of which are vital for enhancing productivity and sustaining economic growth.

The manufacturing sector contributes around 17% to Indias GDP and is projected to reach USD 1 trillion by FY 2026 as India seeks to consolidate its position as a major global manufacturing hub. The Indian automobile industry experienced robust growth in FY 2025, with domestic sales increasing by 7.3% to reach 2,56,07,391 units. The agriculture sector demonstrated resilience, growing at 3.5% in FY 2025, supported by targeted government policies aimed at enhancing productivity, promoting crop diversification and increasing rural incomes. The financial sector remained stable, characterised by healthy credit expansion aligned with deposit growth, indicating a conducive lending environment. Asset quality improved significantly, with Gross Non-Performing Assets (GNPAs) of Scheduled Commercial Banks falling to a 12-year low of 2.6% by September 2024.

In FY 2025, National Highways Authority of India (NHAI) exceeded its construction target by completing 5,614 km of National Highways and achieved record capital expenditure of around Rs. 2,50,000 crores, marking significant growth over previous years. India has witnessed a sharp acceleration in digital payments, signalling a continued move toward a cashless economy. UPI transactions have witnessed a remarkable increase in recent years, with the total transaction value growing from Rs. 21.3 lakh crore in FY 2020 to Rs. 213.8 lakh crore by January 2025. This surge in digital transactions is driving greater financial inclusion, enhancing transparency and contributing to the formalisation of the Indian economy.

OUTLOOK

Indias economy is projected to grow steadily at 6.5% in FY 2026, maintaining the momentum of the previous year and reaffirming its position as the worlds fastest-growing major economy. This growth is underpinned by progressive policies, strong infrastructure investment and rapid digital adoption, reflecting the countrys commitment to inclusive and innovation-driven development. While recent tariff measures have supported domestic industries by reducing import dependence and boosting local demand, they have also challenged export-led sectors by impacting competitiveness and market access. Despite global headwinds and geopolitical uncertainties, Indias outlook remains robust, with growth expected to outpace the global average. Government initiatives to expand access to affordable, quality healthcare are improving social equity and workforce productivity, while continued investments in infrastructure, renewable energy and digital transformation are driving long- term growth and strengthening Indias global economic standing.

Source:

1.https://www.pib.gov.in/PressReleasePage.aspx?PRID=2097921#:~:text=The%20Survey%20observes%20that%20stability.of%20gross%20loans%20 and%20advances.- GNPA

2.https://www.mospi.gov.in/sites/default/files/pressrelease/PRESS-NOTE-ON-SAE-2024-25-Q3-2024-25-FRE-2023-24-and-FE-2022-23-M1.pdf

3.https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=2120509

4.https://www.pib.gov.in/PressReleasePage.aspx?PRID=2098357

5.https://www.siam.in/pressrelease-details.aspx?mpgid=48&pgidtrail=50&pid=579

6.https://www.pib.gov.in/PressReleasePage.aspx?PRID=2117781

7.https://www.pib.gov.in/PressReleasePage.aspx?PRID=2126119

8.https://www.pib.gov.in/PressReleasePage.aspx?PRID=2114840

Industry Overview

INDIAN HEALTH INSURANCE SECTOR

Overview

Health is a major factor that affects the economy of densely populated countries like India. According to the Insurance Regulatory and Development Authority of India (IRDAI), approximately 573 million individuals in India had health insurance coverage in FY 2024, a significant rise from 288 million in FY 2015. Despite this growth, overall insurance penetration remained modest at 40-42% in FY 2024. This figure is projected to increase to 45-50% by FY 2026. Health insurance is emerging as a key driver of growth in the healthcare sector. As coverage expands, with an estimated 45-50% of the population expected to be insured by FY 2026, access to quality healthcare is likely to improve, driving greater demand for medical services.

Health insurance premiums continue to represent the largest share of the non-life insurance sector, despite a moderation in growth following the introduction of the 1/n rule. Standalone Health Insurers (SAHIs) have consistently outperformed the broader health insurance segment, contributing to a rise in the segments market share from 35.3% in FY 2023 to 38.6% in FY 2025. Total premiums for the health segment increased from Rs. 90,667.7 crores in FY 2023 to Rs. 1,09,006.5 crores in FY 2024, reflecting a robust year-on-year growth of 20.2%. This upward trend continued in FY 2025, with premiums reaching Rs. 1,18,687.9 crores, marking a further 8.9% growth over the previous year.

As per the IMARC Group, Indias health insurance market was valued at USD 145.0 billion in 2024 and is expected to grow to USD 308.0 billion by 2033, registering a CAGR of 8.70% from 2025 to 2033. Growth is being driven by rising medical costs, the increasing prevalence of lifestyle-related diseases, heightened awareness and strong performance in regions like North and South India. These areas benefit from superior healthcare infrastructure, broader corporate coverage, rising insurance penetration, supportive government initiatives and growing digital adoption.

Indian Travel Insurance Sector

The India travel insurance market was valued at USD 1,329.40 million in 2024 and is projected to reach USD 6,556.00 million by 2033, growing at a CAGR of 17.30% between 2025 and 2033. This growth is driven by increasing outbound and domestic tourism, rising awareness of travel-related risks and growing disposable incomes. Travellers are shifting from basic policies to comprehensive coverage that includes protection against trip cancellations, baggage loss, flight delays and adventure sports. The surge in medical costs abroad has also encouraged international visitors to opt for higher medical coverage. Furthermore, 62% of Indian travellers purchasing insurance in 2024 sought coverage for destinations across Asia and the UAE, indicating strong demand in popular travel hubs like Thailand, Vietnam, Malaysia and the UAE.

The rise of digital platforms has further accelerated market growth by enabling travellers to easily compare, purchase and manage insurance policies. Insurers are increasingly leveraging AI and data analytics to offer personalised and flexible plans catering to diverse traveller segments, including students, senior citizens and frequent travellers. Additionally, expanding partnerships between insurers and travel service providers are enhancing product offerings and customer experience. These factors collectively position the India travel insurance market for robust growth in the coming years, supported by evolving consumer preferences and technological advancements.

Indian Accident Insurance Sector

Indias accident insurance sector is witnessing a gradual yet steady expansion, fuelled by rising awareness around personal risk coverage and an increasing focus on financial protection. In FY 2026, the personal accident insurance premium stood at approximately Rs. 4,510 crores, reflecting a year-on-year growth of 3.77%. The sector is expected to maintain this trajectory, with premiums projected to reach nearly Rs. 5,173 crores by FY 2028, indicating a compound annual growth rate (CAGR) of around 3.45%. Government-backed initiatives such as the Pradhan Mantri Suraksha Bima Yojana (PMSBY) have played a pivotal role in promoting accident insurance adoption by offering low-cost coverage to individuals across socio-economic segments, particularly those in rural and underserved areas.

However, despite these gains, significant gaps remain in accident insurance penetration. A large proportion of Indias population, particularly in informal and unorganised sectors, still lacks adequate protection against accidental injuries or fatalities. Moreover, nearly half of the countrys vehicles remain uninsured, exposing road users to substantial risk in the event of accidents. Addressing this coverage deficit requires targeted awareness campaigns, simplified policy issuance and claims processes and the development of customised products tailored to regional and occupational risk profiles. By bridging these gaps, the Indian accident insurance market holds strong potential to emerge as a critical pillar of the broader personal insurance ecosystem.

Indias General Insurance Industry

Indias general insurance industry continues to evolve as a critical pillar of the countrys financial and social security framework, marked by steady growth and far-reaching reforms. In FY 2025, the industry reported a 6.2% year-on-year increase in Gross Direct Premium Income (GDPI), with the health insurance segment maintaining its leadership position. The general insurance industry surpassed the Rs. 3 lakh crore milestone in FY 2025, marking a significant expansion in scale. While growth was moderate compared to earlier years, this was largely due to the adoption of the 1/n rule ensuring more accurate revenue recognition by spreading premium income from multi-year policies over their duration along with tempered passenger vehicle (PV) sales and softness in commercial insurance segments. Encouragingly, the strong performance of Standalone Private Health Insurers (SAHIs) provided a boost, helping to balance the overall industry performance.

Insurers	FY 2024	FY 2025	FY 2024 Growth	FY 2025 Growth
Public General Insurers	90,252.1	95,196.0	8.9	5.5
Specialised PSU Insurers	11,190.4	11,106.5	-29.3	-0.7
Private General Insurers	1,55,090.5	1,62,895.7	17.5	5.0
SAHI	33,119.3	38,413.6	26.2	16.0
Total	2,89,652.3	3,07,611.8	12.8	6.2

Source: CareEdge

The sector is undergoing transformative changes to realise the vision of "Insurance for All by 2047." Regulatory reforms, including the introduction of a master circular, have focussed on enhancing customer-centricity through simplified product structures, streamlined claims processes and greater transparency. The Union Budget 2025 further accelerated this momentum by raising the FDI cap in insurance from 74% to 100%, a move expected to attract global capital and expertise.

Medical Tourism

Medical tourism, also known as medical travel or global healthcare, refers to the growing practice of traveling internationally to obtain medical treatments ranging from elective procedures to complex surgeries. India has emerged as a leading global destination for medical tourism, offering high-quality healthcare at affordable costs. With modern hospitals, skilled professionals and a strong tradition of wellness through Ayurveda and Yoga, the country attracts international patients seeking treatments ranging from cardiac surgeries and joint replacements to cosmetic and dental procedures. Indias advantages include English-speaking medical staff and robust clinical capabilities, making it a preferred choice for patients from Asia, Africa and the Middle East.

Government support continues to boost the sector through simplified visa policies, medical tourism zones and public-private partnerships. The Union Budget FY 2026 reinforces this momentum with initiatives like "Heal in India" to elevate Indias global standing. Following a 66% rebound in 2021, the industry grew an estimated 15% in 2024, surpassing pre-pandemic levels with 7.3 lakhs inbound medical travellers, who accounted for 7.8% of all foreign tourist arrivals from January to July 2024.

Source: https://www.imarcgroup.com/india-travel-insurance-market#:~:text=India%20Travel%20Insurance%20Market%20Qverview,17.30%25%20during%20 2025%2D2033.

Source: https://www.reportlinker.com/dataset/c34cb68899a72f837fa2e50d65675e8b9c7b06a0/

Source:https://www.careratings.com/uploads/newsfiles/1745386639 Non-Life%20Insurance%20Update%20for%20March%202025.pdf https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=2098353

*Note: includes all types of medical and medical attendant visa; includes medical visa and medical attendant visa.

Source: CRISIL March 2025 Report

Indias Medical Value Travel (MVT) sector is experiencing robust growth, with the market projected to rise from USD 2.89 billion in 2020 to USD 13.42 billion by 2026. This surge is fuelled by a growing number of international patients seeking high-quality, cost-effective medical care. India offers advanced tertiary and quaternary treatment for complex chronic and non-communicable diseases, along with specialised services in cardiology, orthopaedics, neurosciences and oncology. The countrys comprehensive offerings also include rehabilitation, functional health therapies and holistic wellness practices, reinforcing its position as a premier global healthcare destination.

Primary Growth Factors in Health Insurance

Indias overall insurance penetration remains significantly lower than the global average of 7, which rose from 6.8% in 2022. Insurance penetration in India peaked at 4.2% during the pandemic in 2021-22. The health insurance sectors expansion is propelled by several fundamental factors that are reshaping market dynamics and creating new opportunities for growth. The major growth factors include:

Heightened Health Awareness and Escalating Medical Cost: Indias healthcare landscape is shifting, with growing health awareness amid surging medical costs driven by inflation, advanced treatments and rising non-communicable diseases putting significant financial strain on households. With over 60% of healthcare spending paid out-of-pocket and insurance covering only a third of the population, many families remain financially exposed during medical emergencies. This situation underscores the urgent need for broader health insurance penetration, as comprehensive policies can shield individuals from catastrophic expenses and promote timely medical care.

Technology-led Innovation: Healthcare insurance growth is driven by simple, innovative products, smooth customer experiences and tech- enabled risk and claims management. At the same time, expanding market penetration and maintaining profitability present both key challenges and promising opportunities for the industry.

Grow Through Collaboration: Strategic partnerships and ecosystem development are key enablers of growth in the evolving insurance landscape. Collaborations with government bodies, financial institutions, banks, fintechs and healthcare providers play a pivotal role in expanding reach, enhancing service delivery, managing costs and encouraging innovation across the insurance value chain.

Sustainability and affordability: The health insurance market is growing, driven by rising consumer awareness and escalating healthcare costs that underscore the value of coverage. To improve affordability, insurers are introducing innovative offerings like micro-insurance and customised group policies tailored to specific needs and budgets. High acquisition costs and complex distribution remain key challenges, underscoring the need for cost-effective strategies to boost reach, retention and inclusivity.

Expansion into Tier-2 and Tier-3 Cities: Private healthcare providers are increasingly venturing into Tier-2 and Tier-3 cities, propelled by growing disposable incomes and substantial unmet healthcare demand in these regions. Major hospital chains are adapting their pricing models to align with the local economic context, while continuing to offer advanced super-specialty services in metros and Tier-1 cities. This dual strategy is enabling the creation of a robust, integrated healthcare network that bridges urban and semi-urban areas. This will aid wider acceptance of insurance in these regions.

Source: https://pib.gov.in/PressReleasePage.aspx?PRID=2082732 https://pib.gov.in/PressReleasePage.aspx?PRID=2099519

Innovative Product Solutions: Innovative products tailored to specific needs, such as long-term health insurance linked to savings schemes, can boost health insurance penetration especially among youngsters and women. Additionally, tax relief on premiums will lower the financial burden on low-income groups, unorganised workers and retirees, encouraging broader adoption of health insurance.

Changing Distribution: Insurers are blending traditional and digital distribution channels to expand reach, reduce costs and streamline processes. Consumers increasingly prefer exploring products and using automated services online, while still valuing human support for queries and claims.

Key IRDAI Regulations

IRDAI has introduced key regulations to boost transparency, simplify products, encourage innovation and expand insurance reach.

Inclusive Health Insurance: No Upper Age Limit: IRDAI has mandated that all health insurers offer at least one policy without an upper age limit, removing the previous cap of 65 years. This regulation boosts inclusivity by helping seniors access comprehensive health insurance and improve their financial security. The reform seeks to establish a fairer health insurance market where age does not limit access to quality coverage.

Pre-existing Disease (PED) Waiting Period Lowered to 3 Years: According to IRDAI, the maximum waiting period for coverage of pre- existing diseases in health insurance has been reduced from 4 years to 3 years. This change allows policyholders to claim treatment expenses for conditions like diabetes and hypertension after a maximum of 3 years. Additionally, insurers will no longer be permitted to deny claims related to pre-existing diseases once this period has elapsed.

Adjustment in Waiting Period for Specific Diseases: Under the revised IRDAI guidelines on health insurance, the waiting period for specific ailments and procedures such as joint replacement surgeries has been standardised and reduced to three years. This change offers a significant benefit to patients, enabling them to undergo essential treatments earlier with financial backing from their insurers.

Enhanced Coverage for Critical Medical Conditions: The updated IRDAI guidelines mandate that insurers cannot deny coverage to individuals with serious conditions like heart disease, cancer, renal failure, or AIDS. While subject to underwriting and waiting periods, this ensures greater access to health insurance for high-risk individuals.

Shortened Moratorium Period: The moratorium period during which insurers can contest claims due to nondisclosure has been reduced to five years, strengthening trust between policyholders and insurers. After this period, claims cannot be challenged except in cases of proven fraud, offering policyholders greater assurance and long-term security.

Tailored Plans for Specific Groups: Insurers are encouraged to develop tailored health insurance products that specifically address the needs of children, seniors, students and maternity cases. This approach ensures that the diverse health requirements across different life stages and circumstances are effectively met.

Cashless Treatment Framework and Reimbursement Norms: Insurers must keep an updated list of empanelled hospitals and providers eligible for cashless claims. Additionally, they must establish clear and transparent guidelines for processing reimbursement claims for treatments received outside the approved network.

Support for Multiple Claims under Various Policies: The 2025 IRDAI guidelines allow policyholders with benefit-based policies to file claims with multiple insurers, increasing flexibility. This change enhances financial support during medical emergencies and helps policyholders better manage healthcare costs. These reforms aim to create a more inclusive and accessible health insurance environment for all age groups in India.

Tailored Health Insurance Plans for Specific Demographics: Insurers are now urged to offer tailored health plans for groups like children, seniors, students and those needing maternity cover. This initiative recognises the diverse healthcare requirements that arise at different life stages and under specific conditions, promoting a more personalised and need-based approach to health insurance coverage.

Government Initiatives and Key Regulatory Developments

Government health insurance schemes in India play a vital role in promoting equitable access to affordable healthcare by alleviating the financial strain of medical costs, especially for economically disadvantaged groups, through initiatives led by both central and state authorities.

Source: https://www.business-standard.com/finance/insurance/irdai-annual-report-2023-24-insurance-penetration-decline-124122500470 1.html

https://www.expresshealthcare.in/news/indian-health-insurance-a-shifting-landscape/445736/#:~:text=In%20a%20game%20where%20the.and%20delays%20in%20patient%20care.

https://neosciencehub.com/indian-corporate-healthcare-sector-on-track-for-15-growth-in-fy26/#:~:text=The%20Indian%20corporate%20healthcare%20sector,Research%20find%2DRa).&text=Several%20factors%20are%20converging%20to,hospitals%2C%20particularlv%20in%20urban%20areas.

Source: IRDAI

The Union Budget for FY 2026 reinforces the Government of Indias commitment to enhancing healthcare, with an increased allocation of Rs. 99,859 crores an 11% rise from the previous year. Key initiatives include exemptions for 37 additional drugs, the launch of 13 patient assistance programmes, support for medical tourism under the Heal in India initiative and the extension of broadband connectivity to rural health centres through BharatNet. These measures aim to improve healthcare access, affordability and infrastructure across the country.

From FY 2015 to FY 2022, government health spending increased from 29.0% to 48.0%, while out-of-pocket expenses dropped from 62.6% to 39.4%. Backed by ongoing investments, supportive policies and innovation, India is poised to become a global leader in digital healthcare. Enhanced data sharing, strong public-private partnerships and scalable service models are positioning the country to set new standards in digital health innovation, as recognised by the World Economic Forum.

Strengthening Healthcare Infrastructure and Reducing Costs: The healthcare sectors key priorities include establishing 200 Day Care Cancer Centres and upgrading district hospitals to enhance both accessibility and the quality of care. Additionally, expanding Basic Customs Duty exemptions on life-saving drugs and medical equipment aims to reduce treatment costs and encourage domestic manufacturing, supporting the broader goal of affordable and efficient healthcare delivery.

Strategic Public Health and Allied Sector Programmes: The National Health Mission (NHM) budget saw a modest 3% increase to approximately Rs. 37,227 crores in FY 2026, reflecting steady support for primary healthcare. Building on this momentum, the National Organ Transplant Programmes allocation rose significantly by 50% to Rs. 15 crores, while the National Tele Mental Health Programme experienced an even larger boost of 77%, reaching Rs. 80 crores.

Department of Health Research (DHR): The Department of Health Researchs budget for FY 2026 increased by 15% to about Rs. 3,901 crores, supporting health research centres and infrastructure. The Indian Council of Medical Research (ICMR) received Rs. 3,126 crores, a 9% rise from last year. Funding for biosecurity, pandemic research and the One Health platform surged 87%, rising from Rs. 187 crores to Rs. 350 crores.

Healthcare Infrastructure Development: The Pradhan Mantri Swasthya Suraksha Yojana (PMSSY) received almost 15% increase to help set up 22 new AIIMS hospitals and upgrade 75 government medical colleges. In the last ten years, 1,10,000 new medical seats were added, growing by 130%. Next year, 10,000 more seats are planned as part of a five-year target to add 75,000 new seats.

Human Resources for Health: The budget for human resources in health and medical education has surged by 189%, rising from approximately Rs. 579 crores in FY 2025 to around Rs. 1,675 crores in FY 2026, with a particular emphasis on the nursing sector.

Ministry of AYUSH and Other Allied Programmes: The Ministry of AYUSH has been allocated an increased budget of approximately Rs. 3,993 crores for FY 2026, marking nearly a 14% rise from Rs. 3,498 crores in the previous year. Funding for the Swachh Bharat Mission (Urban) has more than doubled to Rs. 5,000 crores. The Jal Jeevan Mission will continue until 2028, aiming to ensure universal access to clean drinking water, thereby significantly reducing the incidence of food and waterborne diseases.

Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PMJAY): The AB-PMJAY budget increased by nearly 24%, rising from Rs. 7,606 crores in FY 2025 to Rs. 9,406 crores in FY 2026, which has enhanced access to affordable healthcare and reduced out-of-pocket expenses. As a result, over 369 million Ayushman Cards have been issued by March 2025. Coverage was further extended in March 2024 to include 3.7 million ASHAs, Anganwadi workers, helpers and their families, while from October 2024, nearly 60 million senior citizens aged 70 and above became eligible for free treatment benefits up to Rs. 5 lakhs annually.

Pradhan Mantri Ayushman Bharat Health Infrastructure Mission (PM-ABHIM): Launched with a total budget of Rs. 64,180 crores for 2021-2026, the mission focusses on strengthening health infrastructure and emergency preparedness. By 3 December, 2024, it supported the construction of 17,788 Sub-Centres, 11,024 Urban Health & Wellness Centres (Ayushman Arogya Mandirs), 3,382 Block Public Health Units, 730 Integrated Public Health Labs and 602 Critical Care Hospital Blocks.

Ayushman Bharat Digital Mission (ABDM): Launched in September 2021, the Ayushman Bharat Digital Mission (ABDM) aims to build a unified digital health ecosystem. As of 6 February, 2025, over 739.8 million health accounts have been created, linking 490.6 million health records. The Health Facility Registry includes 3,63,000+ facilities and the Healthcare Professional Registry covers over 5,64,000 professionals, with 1,59,000+ facilities using ABDM-enabled software. ABDMs funding rose 51% to Rs. 340 crores, reflecting the governments commitment to enhancing health infrastructure and digital health.

PE Investment in the Heath Care and its Impact: Since 2020, Indias healthcare sector has emerged as a strong magnet for investors, attracting US$14.5 billion in PE/VC investments, with 58% of the inflows recorded in 2023 and 2024. The sectors growth has been led by hospitals and clinics, which accounted for 60% of investments and 55% of all deals, underscoring the confidence of investors in the sectors ability to scale and deliver healthy returns.

The exit environment has been equally encouraging, with US$8.8 billion realised since 2020, led by hospitals and clinics at 76%. Rising demand for quality healthcare, growing awareness, and the sectors resilience have positioned India as a highly attractive destination for long-term healthcare investments. The pandemic further strengthened this momentum by accelerating demand for hospitals, medical devices, and wellness solutions, while also opening new opportunities for start-ups focused on innovation. With strong fundamentals and vast untapped potential, Indias healthcare sector is set to continue delivering sustainable growth and value for both investors and society.

Source: https://www.ey.com/en in/newsroom/2025/04/pe-vc-investments-in-india-reach-us-dollor-13-point-7-billion-across-284-deals-in-1q-2025

Company Overview

Star Health and Allied Insurance Company Limited (hereafter referred to as The Companyor Star Health) has maintained its leadership position as the largest standalone health insurer in India. The Company has retained its leading position among private health insurers, securing a retail market share of 33% during the year under review. Star Health, as of 31 March, 2025, had a branch network that was 3 times larger than the second-largest non-public health insurance provider.

Star Health, as of 31 March, 2025, has an extensive distribution network comprising 913 health insurance branches and over 2,000+ customer touchpoints, covering 25 states and 5 Union Territories in India. The Companys existing branches are further supported by a widespread network of over 1,000 + Sales Managers Stations (SMS) and 8,800+ Sales Managers.

Star Health has successfully expanded its reach across India, covering 724 out of over 19101 PIN codes through its wide-reaching sales distribution network. Star Health has also received significant contributions to its total premium income (GWP) from banks and other corporate agents. The Companys other distribution channels include direct online sales through telemarketing and its website, brokers, insurance marketing firms and web aggregators. Star Health has achieved a notable distinction by operating with the lowest Expense of Management (EOM), maintaining a figure well below the IRDAI-mandated limit of 35% during FY 2025. The Companys continued excellence demonstrates its commitment to achieving exceptional performance in the healthcare industry.

In accordance with the IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulation, 2024 and Master Circular thereon dated 17 May, 2024, with effect from 1 October, 2024 the Company has given effect to recognise gross written premium on a 1/n basis where "n" denotes the policy duration and the numbers denoted below are on "n" basis in comparison with prior periods.

Star Health has the largest agency network, marked by the highest agent productivity among all SAHI companies. The Company distributes health insurance policies primarily through individual agents, who contributed over 81% of its Gross Written Premium (GWP) in FY 2025. The Companys total number of individual agents grew from 7 lakhs in FY 2024 to 7.8 lakhs in FY 2025.

The Companys additional distribution channels include direct online sales, brokers, insurance marketing firms and web aggregators. Star Health agency distribution channel also incorporates corporate agent banks and other corporate agents, contributing Rs. 8,932.2 million and Rs. 320.9 million, respectively, to the Companys Gross Written Premium (GWP) in FY 2025.

The Company offers a diverse range of coverage options, including retail health, group health, personal accidents and overseas travel, which constituted 91.5%, 7.3%, 1.1% and 0.1% of the total Gross Written Premium (GWP) in FY 2025.

The Company tailors its product offerings to a wide spectrum of customers, including individuals, families, students, senior citizens and those with pre-existing medical conditions. The Companys strategy is designed to effectively serve the broader middle-class consumer base. The Company has consistently maintained market leadership in the non-public health insurance sector for new branch openings over the past few years, demonstrating sustained growth.

The Company has implemented various strategies to enhance its operational efficiency and financial performance. The Company has realigned its group strategy, emphasising profitability through the adoption of stringent underwriting guidelines. Star Health has also introduced a risk- based pricing mechanism to ensure a more strategic approach to pricing. The Company has recalibrated its portability strategy to optimise flexibility for policyholders. The Company has consistently expanded its hospital network and engaged in negotiations to secure favourable pricing arrangements with network partners. The Company has taken concerted efforts to increase the share of higher sum insured policies, offering enhanced coverage options. The Companys initiatives collectively reflect its commitment to sustainable growth and financial resilience.

FY 2025 Business Highlights

Star Health sustained strong momentum in its core retail business in FY 2025, driven by a 24.7% increase in fresh retail Gross Written Premium (GWP). The Company achieved this growth through enhanced agent productivity, focussed marketing efforts and accelerated digital adoption. Star Health launched the "Superstar" policy as a key growth catalyst, generating over Rs. 580 crores in GWP.

The Company positioned this product as a digital frontrunner, offering 21 optional covers and unique features such as "Freeze Your Age" and "Limitless Care," which appealed to customers for their flexibility, wellness focus and compelling pricing.

The Company expanded policy issuance by 6%, driven by an 11% increase in new policies and 5% growth in renewals.

Star Health built on this momentum to deliver a 15.1% YoY increase in total GWP, supported by a 24.3% rise in fresh business and a 12.5% growth in renewals.

The Companys growth was reflected by a diversified distribution strategy anchored in four key channels:

Agency Business: The agency channel continued to be the cornerstone of Star Healths operations, contributing 82% to the overall gross written premium during FY 2025. Fresh business from this channel recorded a robust 16% YoY growth. During the year, the Company added 74,000 new agents, increasing the total agent count to 7.75 lakhs. Over the next three years, Star Health aims to expand this network to 1 million agents. This expansion remains a key lever in the Companys strategy to deepen insurance penetration, particularly in non-metro cities and emerging towns.

Banca Assurance Channel: The Banca channel contributed 7% to the Companys business in FY 2025, with a 13% YoY increase in fresh business. Star Health benefits from a strong network of over 20,000 partner bank branches. However, growth in this segment moderated due to regulatory shifts, as banks focussed more on core products and compliance in light of the ”1 by n" guideline. Despite this, indemnity-based health insurance continues to be a priority product in this channel, meeting rising healthcare awareness and demand.

Corporate Business: The corporate segment, focussed on serving micro, small and medium enterprises (MSMEs), contributed 3% to Star Healths overall portfolio in FY 2025. Fresh business from this segment grew by 21% YoY. The Companys proprietary SME calculator enhanced agent productivity and business generation within the SME and MSME segments, reflecting Star Healths growing relevance in this ecosystem.

Digital Business: The digital segment accounted for 8% of the Companys total business in FY 2025, supported by strong momentum across direct-to-consumer platforms and digital partners. Star Healths own online channel contributed 72% of the digital business, while the remaining 28% came from online brokers and web aggregators. The segment witnessed a remarkable 71% growth in fresh business, underlining the increasing adoption of digital channels.

Star Health, under IND AS, has a combined ratio of 101.1%, compared to 97.3% in FY 2024. The Company saw an increase in its claims ratio to 70.7%, while achieving a marginal improvement in its expense ratio to 30.4%. Star Health reported investment income of Rs. 1,260 crores, up from Rs. 1,171 crores in the previous year, delivering a yield of 7.7%. The Companys investment assets rose by 15.5% to Rs. 17,889 crores. The Companys profit before tax stood at Rs. 1,054 crores and profit after tax at Rs. 787 crores, compared to Rs. 1,480 crores and Rs. 1,103 crores respectively in FY 2024. Star Health delivered a return on equity of 9.5% and maintained a strong solvency ratio of 2.21 times, comfortably above regulatory requirements.

In FY 2025, Star Health demonstrated its commitment to inclusive healthcare by launching Indias first health insurance policy in Braille for the visually impaired. Marking significant progress in customer satisfaction, Star Healths overall Net Promoter Score (NPS) improved to 54 in FY 2025 from 42 in FY 2024, while the claims NPS rose to 55 from 47. Operational efficiencies also improved, with 96% of cashless claims processed within 3 hours and the claim rejection rate reduced to 10% from 13% in FY 2024. Preventive health checks saw a 48% increase and the Companys home healthcare services expanded to 156 cities. Star Health achieved 2.53% savings in claims outgo. Digital engagement also strengthened, with app downloads rising to 1 crore from 57 lakhs in FY 2024.

Additionally, the Company undertook repricing for five products, covering approximately 60% of its portfolio, to ensure continued affordability and sustainability.

Star Health faced headwinds from a challenging claims environment. The Companys overall claims ratio increased to 70.3%, reflecting a higher frequency and severity of hospitalisations and surgical procedures. Star Health experienced a rise in the group segments loss ratio from 77.3% to 89.8%, despite its smaller portfolio size. The Company responded by recalibrating its group business strategy, successfully reducing the segments GWP contribution from 9% in Quarter 2 FY 2025 to 7% in Quarter 4 FY 2025.

Star Health has marked FY 2026 as the "Year of the Customer," with a sharp focus on strengthening underwriting practices and adopting smarter pricing models that incorporate discounts based on claims behaviour- to drive affordability and enhance customer experience. Tailored health insurance products will be introduced for Gen Z, early earners, senior citizens, and underserved regions, in line with emerging health trends and regional needs.

Through a Digital-First Execution approach, the company aims to elevate service delivery via Al-enabled claim pre-authorisation, real-time processing, and an expanded suite of self-service options on its mobile app. Moving beyond transactional engagement, Star Health is transitioning to a transformational service model, underpinned by referral-led growth, loyalty programmes, and faster turnaround times. Every customer touchpoint will reflect the Companys vision of making health insurance more personal, inclusive, and future-ready.

Governance Framework ESG Focus

In 2024, Star Health was distinguished as Indias most sustainable insurer by the S&P Global Corporate Sustainability Assessment (CSA), underscoring its unwavering commitment to ESG excellence. The Company attained the prestigious Indian Green Building Council (IGBC) Platinum Rating for its Corporate Office interiors and secured ISO 9001:2015 certification for its robust quality management systems.

Building on this foundation, Star Health has significantly advanced its environmental efforts. The company has procured Bureau of Energy and Efficiency (BEE) 3-star and above rated appliances, ensuring energy-efficient operations. Additionally, Star Health has obtained carbon offset certificates for efficient IT purchases, demonstrating a commitment to reducing its carbon footprint. The company ensures responsible e-waste disposal through authorised vendors, promoting sustainable waste management practices. By transitioning to e-claims for renewals, Star Health has reduced paper usage and enhanced operational efficiency. Furthermore, the implementation of smart energy management systems and water management has optimised resource use and minimised environmental impact.

As part of our social initiatives, Star Health Insurance proudly launched Indias first insurance policy in Braille, Star Special Care Gold, empowering the visually impaired community with accessible insurance options. In 2024, we also introduced the "Faces of Star Health" campaign, celebrating

our employees and earning the "Great Indian Employee Engagement Strategy of the Year" award. Additionally, our "FIT FEST" Journey, a comprehensive health programme, saw 2,326 participants engage in activities such as Zumba, Gym Challenges, Cycle Marathons, Yoga, and healthy eating initiatives, promoting overall well-being. We also achieved over 1.5 lakh enrolments in our wellness programmes, launched nine programmes for chronic conditions, and introduced the HER Health initiative for womens wellness, along with Mind and Body programmes. We launched "Star Health on Wheels," mobile clinics providing free basic health check-ups in district areas of Tamil Nadu and Andhra Pradesh. Star Arogya Digi Seva aimed at benefiting individuals from low economic backgrounds by addressing no communicable diseases in vulnerable communities across 74 villages and raising awareness on health-seeking behaviour to save lives.

Star Health strengthened its governance framework by updating key policies, including the Code of Conduct, Whistle blower Policy, Anti-Fraud Policy, Anti-Money Laundering Policy, Sustainable Financial Inclusion Policy, and Human Rights Policy, ensuring robust compliance, transparency, and ethical business practices across operations.

Star Health was rated Indias most sustainable insurer by S&P Global, earning an impressive ESG score of 53.

RISK MANAGEMENT

Star Health has established a comprehensive risk management process to safeguard its business operations. The Company ensures that business leaders across departments proactively identify and address critical risks within their respective areas, implementing appropriate mitigation strategies as required. Star Health regularly monitors the risk environment, along with the effectiveness and status of mitigation plans. The Company operates each department in alignment with standard operating procedures and a regularly updated business continuity plan to ensure the sustained effectiveness of its risk controls. Star Health has adopted robust risk assessment frameworks, identified key risk areas and developed comprehensive mitigation strategies. The Company continuously manages and monitors risks to maintain strong operational resilience and protect shareholder value. Star Health proactive approach to risk management reflects its commitment to long-term success and adaptability in a dynamic business and regulatory environment.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has established an internal control system that is commensurate with the size, scale, and complexity of its operations, which is designed to provide reasonable assurance on:

• the reliability of financial reporting,

• compliance with applicable laws, regulations,

• safeguarding of assets, and

• operational efficiency and effectiveness.

The Companys internal control environment is based on the control framework comprising defined policies and procedures, roles and responsibilities, and delegation of authority. This environment facilitates identification, assessment, and mitigation of risks across business functions.

The Internal Audit Department is independent and reports directly to the Audit Committee. Based on the annual audit plan approved by the Audit Committee, it conducts regular audits across business and support functions to evaluate the design and operating effectiveness of internal controls. It employs Risk and Controls Matrices (RACM) to document key risks, associated controls and action plans. Additionally, it conducts monitoring activities periodically to strengthen and enhance the effectiveness of the internal control system. Every quarter, a report detailing identified risks, along with management action plans and remediation timelines, is presented to the Audit Committee for review.

Further, the Audit Committee performs an oversight role in ensuring the integrity of the financial reporting process and the internal control systems.

The Committee reviews the adequacy of internal controls, significant audit observations, risk management practices, and compliance with laws and regulations on a quarterly basis.

HUMAN RESOURCES

Star Health empowers its workforce by aligning training initiatives with individual skill sets. The Company recognises the critical role employee quality in achieving organisational success. The Company prioritises the availability of accurate information and effective strategies to continuously enhance and modernise its HR processes, thereby supporting overall business growth. Star Health grants employees the authority and flexibility to adapt to evolving technological landscapes. The Company conducted a range of training programmes throughout the year, covering areas such as technical skills, behavioural development, business excellence, general and advanced management, leadership, customer orientation, safety, values and the code of conduct. Star Health, as of 31 March, 2025, had a workforce of 15,816 employees.

CAUTIONARY STATEMENT

The Management Discussion and Analysis section includes the Companys objectives, projections, estimates and expectations, which may constitute forward-looking statements under applicable laws and regulations. These statements may differ materially from actual results, whether expressed or implied. Important factors that could influence the Companys operations include the availability and pricing of raw materials, cyclical demand and pricing trends in the Companys core markets, changes in government regulations and tax policies, fluctuations in foreign exchange markets, economic developments within India and in countries where the Company operates, as well as other incidental factors.