Star Health & Allied Insurance Company Ltd Management Discussions

GLOBAL ECONOMY Overview

In 2023, the global economy experienced robust growth despite the challenges of central banks raising interest rates to combat inflation, limited fiscal support due to high debt levels, and low underlying productivity growth. The global economys strength was driven by strong economic activity and adaptability to changing financial conditions. Households in major developed countries actively utilised their pandemic savings, which provided an unexpected boost to economic momentum.

Global economic stability was further reflected in steady job growth, rising incomes, strong consumer demand, increased government spending, and higher labor force participation. The global economy grew by 3.2% in 2023, compared to 3.5% in 2022. Advanced economies played a crucial role in sustaining global resilience, growing at 1.6% in 2023. The advanced economies benefited from steady employment growth and a resurgence in consumer confidence, which supported their stability despite significant monetary tightening. In the United States, economic growth has not only recovered but has also exceeded the levels observed before the pandemic. Emerging market and developing economies (EMDEs) also demonstrated resilience during the year, with growth increasing from 4.0% in 2022 to 4.3% in 2023. To achieve a stable and sustainable global economy, implementation of medium-term fiscal consolidation and enhancing multilateral cooperation among nations has been essential. These steps are crucial for ensuring long-term economic stability and prosperity.

Performance of major economies

World Economic Output (%)

Particulars	2023	2024P	2025P
World Output	3.2	3.2	3.2
Advanced Economies	1.6	1.7	1.8
United States	2.5	2.7	1.9
Euro Area	0.4	0.8	1.5
Japan	1.9	0.9	1.0
United Kingdom	0.1	0.5	1.5
Canada	1.1	1.2	2.3
Other Advanced Economies	1.8	2.0	2.4
Emerging Market and Developing Economies	4.3	4.2	4.2
Emerging and Developing Asia	5.6	5.2	4.9
China	5.2	4.6	4.1
India	7.8	6.8	6.5
ASEAN-5 (Indonesia, Malaysia, Philippines, Thailand, Vietnam)	4.1	4.5	4.6

Source: IMF World Economic Outlook April 2024

OUTLOOK

Global inflation is expected to gradually decrease, from an annual average of 6.8% in 2023 to 5.9% in 2024, and further to 4.5% in 2025. Despite the ongoing impact of tight monetary policy and higher energy costs, the Euro Area is projected to grow in 2024. Advanced economies are forecasted to grow by 1.7% in 2024, with a slight increase to 1.8% in 2025. Although headline inflation is expected to decrease gradually, persistent structural challenges, such as limited capital and labour mobility, may continue to impede progress toward achieving higher living standards, particularly in middle- and lower-income countries.

Emerging markets and developing economies are expected to grow by 4.2% in both 2024 and 2025. The global economic outlook is expected to remain stable; however, rising interest rates and geopolitical conflicts, such as the Russia-Ukraine war and ongoing tensions between Israel and Palestine, might cause further supply chain disruptions. The global economy is expected to adopt medium-term fiscal consolidation and promote multilateral cooperation among nations, to overcome these challenges.

INDIAN ECONOMY Overview

The Indian economy witnessed significant growth in FY 23-24, favoured by positive macroeconomic indicators and factors including enhanced conditions in the labour market, robust urban demand, and a government emphasis on capital expenditure. According to the National Statistics Organisation (NSO), the Indian economy grew by 8.2% in FY 23-24, surpassing the 7.0% growth recorded in the preceding FY 22-23.

Growth of the Indian economy

Particulars	FY 21-22	FY 22-23	FY 23-24	FY 24-25P
Real GDP growth (%)	9.7	7.0	8.2	7.2

Growth of the Indian economy quarter by quarter, FY 23-24

Particulars	1Q	2Q	3Q	4Q
	FY 23-24	FY 23-24	FY 23-24	FY 23-24
Real GDP growth (%)	8.2	8.1	8.6	7.8

Source: NSO estimates dated May 31, 2024

RBI MPC (Monetary Policy Committee) report dated June 07, 2024

The steady decrease in Indias fiscal deficit has improved the governments financial stability. The fiscal deficit target for FY 24-25 has been lowered to 5.1%, compared to the previous target of 5.8% for FY 23-24. This expected reduction shows a move toward better fiscal discipline, indicating the governments progress in managing its budget more efficiently. Despite global supply chain disruptions and adverse weather, domestic inflation pressures eased in FY 23-24. Retail inflation decreased from 6.7% in FY 22-23 to 5.4% in FY 23-24.

Indias overall exports hit a record USD 776.68 billion in the fiscal year ending March 31, driven by strong services exports that offset a 3.11% decline in merchandise exports. Indias total goods imports for FY 23–24 decreased by 5.66% to USD 675.44 billion. Strong foreign exchange reserves have been essential in stabilising the Indian economy, supporting monetary policy, and enhancing investor confidence. As of June 7, 2024, Indias foreign exchange reserves rose to USD 656 billion, up from USD 595 billion on June 9, 2023.

In FY 23-24, the manufacturing sector rebounded with a 9.9% growth, recovering from a weak FY 22-23. This growth was driven by lower input costs and steady domestic demand. Similarly, the construction sector also grew by 9.9% due to increased infrastructure projects and strong demand in commercial and residential real estate. The services sector showed a strong performance, with both Goods and Services Tax (GST) collections and e-way bill issuances demonstrating double-digit growth. Financial and professional services have been key drivers of growth following the pandemic.

Gross Fixed Capital Formation (GFCF) remained a significant growth driver, with private non-financial corporations increasing their GFCF by 19.8% in FY 22-23. This positive trend continued into FY 23-24, with private investment across over 3,200 firms growing by 19.8%. Households also contributed to capital formation, with residential real estate sales in 2023 reaching their highest level since 2013, showing a 33% year-over-year increase with 410,000 units sold in the top eight cities.

The banking and financial sector, with stronger balance sheets and capital buffers, is well-equipped to support rising investment demand. Credit disbursal to industrial micro, small, and medium enterprises (MSMEs) and services continued to grow in double digits. Personal loans for housing have also surged, reflecting increased housing demand. As of March 2024, the GNPA ratio for scheduled commercial banks (SCBs) decreased to 2.8% from 4.1% in March 2023. Meanwhile, Net Non-Performing Assets (NNPAs) dropped to 0.6% from 1.0%, reaching an all-time low. This improvement is attributed to reduced slippages, consistent write-offs, and effective recoveries over the year.

The Indian auto industry experienced 12.5% growth in FY 23-24. The total number of units sold increased to 23.9 million from 21.2 million in the previous year. Total two-wheeler wholesales in the domestic market grew by over 13% in FY 23-24, reaching 18.0 million units, compared to 15.9 million units in FY 22-23.

In 2023-24, the National Highways Authority of India (NHAI) set a record by spending 2.1 trillion on national highway construction, a 20% increase from previous years. The total length of highways constructed reached 6,644 km, marking a 53% increase from the previous year. In the realm of business, the integration of digital platforms and e-commerce has paved the way for entrepreneurs, enabling global trade and expanding opportunities. The increasing digitisation of services has granted mobile users unparalleled convenience and flexibility in accessing a diverse range of resources. According to the Telecom Regulatory Authority of India (TRAI), the number of mobile users experienced a significant surge, escalating from 798.69 million as of December 31, 2022, to 865.28 million as of December 31, 2023, marking an annual growth rate of 8.34%.

The adoption of technology-driven solutions in India, especially innovative digital payment methods like the unified payments interface (UPI), has profoundly fuelled the growth of e-commerce in the country. Digital payment transactions have exhibited remarkable expansion, with the volume soaring from 2,071 crore in FY 17-18 to 13,462 crore in FY 22-23, indicating a robust Compound Annual Growth Rate (CAGR) of 45%. As of December 11, 2023, digital payment transactions for FY 23-24 have already surpassed 11,660 crore, underscoring the sustained momentum in digital payment adoption, and creating an environment for businesses to cross-sell products and attract new clients.

OUTLOOK

Amidst the uneven and uncertain global economic recovery, the Indian economy has demonstrated unwavering resilience and robustness. The enduring strength of the Indian economy, coupled with recent reforms, has established a sturdy foundation for sustained long-term growth. According to the Reserve Bank of India (RBI), the countrys GDP is expected to attain a growth rate of 7.2% in FY 24-25. The significant high-frequency indicators, such as automobile sales and GST revenues, consistently indicate significant progress, indicating an optimistic outlook for the overall economy. India is expected to outpace Germany and Japan, becoming the third-largest economy by the end of the decade. However, potential risks include prolonged geopolitical tensions, more restrictive global financial conditions, and a deceleration in external demand.

Source: https://www.india-briefing.com/news/indias-trade-performance-fy-2023-24-exploring-new-export-markets-32612.html/#:~:text=According%20 to%20the%20Ministry%20of,percent%20to%20US%24675.44%20billion. https://pib.gov.in/PressReleasePage.aspx?PRID=2020659 https://economictimes.indiatimes.com/news/economy/infrastructure/ nhai-spends-record-2-07-lakh-cr-in-2023-24-builds-6644-km-of-roads/ articleshow/108983705.cms?from=mdr

https://www.thehindubusinessline.com/economy/indian-automobile-industry-records-125-growth-in-FY 23-24/article68057552.ece

https://static.pib.gov.in/WriteReadData/specificdocs/documents/2024/jul/ doc2024722351601.pdf

https://pib.gov.in/PressReleasePage.aspx?PRID=2020659

Union Budget FY 24-25 Provisions

The Indian governments focus on infrastructure is expected to enhance medical colleges, increase the healthcare workforce, and improve the quality of care. This expansion will also boost healthcare education and training, ensuring a steady supply of skilled professionals. The strong management of maternal, child, and adolescent health programmes would lead to better health outcomes and ensure that efforts are well-coordinated with allied ministries, such as AYUSH and Anganwadi Centres. Additionally, reducing customs duty on cancer medicines will make treatments more affordable, directly benefiting patients by reducing out-of-pocket expenses. Streamlining exemption regimes will simplify administration for exempt organisations and the tax department, making the process more efficient for all parties involved.

The Government of India has allocated approximately 90,958 crore for the healthcare sector in the FY 24-25 budget, which represents a 2% increase from the previous years allocation of 89,155 crore. The budget for the Department of Health and Family Welfare increased by 12% to nearly 87,656 crore. The allocation for the Department of Health Research rose by 13% to 3,301 crore. Funding for biotechnology research and development doubled to 1,100 crore. Other major announcements under the budget were as follows:

Healthcare Coverage:

The budget for Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) increased by 7% to 7,300 crore.

Healthcare coverage was extended to all ASHA and Anganwadi workers and helpers.

Healthcare Infrastructure: Along with a 28% decrease in the budget for new AIIMS and other healthcare institutes, the Pradhan Mantri Ayushman Bharat Health Infrastructure Mission received a 63% increase in funding to 3,756 crore.

Public Health Programmes: The budget for maternal and child health Programmes increased by 23% to approximately 28,783 crore. The National Health Mission budget increased by 14% to 36,000 crore. Other significant increases include a 27% rise for tertiary care Programmes and a substantial boost for the National Drugs Deaddiction Programme.

Disease Surveillance and Management: The National Centre for Disease Control received a 93% increase in its budget to 52 crore. Overall disaster preparedness and emergency medical services funding increased by 32% to 94 crore.

Human Resources for Health: Although the budget for human resources in health and medical education decreased by 16%, the Department of Health Research saw a 69% increase for capacity building. The budget for the performance-linked incentive scheme for the pharmaceutical industry increased significantly. Increased funding was allocated for health and medical education under schemes like Pradhan Mantri Awas Yojana, Saksham Anganwadi, and POSHAN 2.0.

Cancer Treatment and Medical Devices: Exemptions on custom duties for three cancer drugs and various medical devices were announced.

Indirect Taxes: Customs duty exemptions were extended for various medical equipment and life-saving drugs. New provisions were introduced under the GST for conditional waivers and to regulate non-levy or short levy of taxes.

Direct Taxes: Domestic corporate tax rates remained unchanged, while tax rates for foreign companies were reduced. Changes were made to streamline the tax exemption regime for charitable organisations.

The budget also included rationalisation of TDS rates and provisions to ease compliance.

Source: https://assets.kpmg.com/content/dam/kpmg/in/ pdf/2024/07/healthcare-pov-union-budget-2024-25.pdf

INDIAN HEALTH INSURANCE SECTOR

Indias insurance sector is experiencing rapid growth due to a strong economic foundation, a growing middle class, innovation, and robust regulatory support. The Insurance Regulatory and Development Authority of India (IRDAI) aims to ensure that all citizens have adequate life, health, and property insurance coverage by 2047, implementing various initiatives and reforms.

The general insurance industry reported an annual premium of nearly 2.9 lakh crore for FY 23-24, marking a 13% increase from the 2.6 lakh crore reported in FY 22-23. Indias Standalone Health Insurers (SAHI) grew at twice the rate of the general insurance industry in FY 23-24. The five standalone health insurance companies reported a 26.2% increase in total premium, rising from 26,243 crore to 33,115 crore. This growth can be attributed to an increase in overall ticket sizes, with all SAHI companies launching high-value policies worth crores of rupees. Additionally, there has been a revision in premium rates to keep up with medical inflation and the broadening scope of coverage. The market share of the SAHI group within the general insurance sector grew to 11.43% in FY 23-24 from 10.22% recorded in the previous year.

The health sector constitutes the largest segment of non-life insurance business in India. While affordability constraints may limit demand among lower-income groups, the expanding middle class and increased discretionary spending are expected to drive overall growth. The Indian healthcare insurance sector is set for significant growth due to rising medical inflation and the increasing impacts of climate change. Higher medical costs, advancements in treatments, and greater healthcare demand are driving the need for comprehensive coverage. Additionally, frequent climate-related events like heatwaves, hurricanes, and monsoon floods are increasing health issues, boosting demand for relevant insurance policies. Enhanced digital accessibility, economic growth, and government initiatives further support this trend, while insurers offer innovative and customised products. These factors collectively position the sector for robust expansion, ensuring better health coverage and financial security.

Indian Travel Insurance Sector

The India Travel Insurance Market is expected to achieve a 12% CAGR over the forecast period between 2024 and 2029. The travel insurance market in India represents less than 1% of the global travel insurance industry.

As travel becomes integral to intellectual, business, and personal life, the primary goal of travel insurance is to ensure hassle-free travel and minimise risks. This coverage extends to financial losses incurred during domestic or international travel, which is expected to drive the growth of the travel insurance market in India.

Additionally, increasing instances of natural calamities and medical emergencies during travel are boosting the demand for travel insurance. However, a lack of awareness about insurance policies may pose a significant challenge to the growth of the Indian travel insurance market during the forecast period. Indian travellers are projected to take 5 billion more trips by 2030, with spending on travel and tourism expected to reach USD 410 billion, a surge of over 170% from USD 150 billion in 2019. This growth is driven by increased disposable income, package holidays, extensive media coverage of different holiday types, and easy online travel bookings. This increase in travel activity will likely boost the travel insurance market, as more travellers seek to mitigate risks and ensure hassle-free travel experiences.

Source: https://www.mordorintelligence.com/industry-reports/india-travel-insurance-market https://www.cnbc.com/2023/11/02/indian-travelers-are-set-to-be-fourth-largest-global-spenders-by-2030-.html

Indian Accident Insurance Sector Overview

The 2022 Road Accidents in India report by the Ministry of Road Transport and Highways states that States and Union Territories reported 4,61,312 road accidents in 2022. These accidents caused 1,68,491 deaths and 4,43,366 injuries. The number of accidents increased by 11.9%, fatalities rose by 9.4%, and injuries went up by 15.3% in 2022, as compared to the previous year. The accident insurance coverage can provide financial protection and support for individuals and families affected by road accidents, covering medical expenses, loss of income, and other related costs, thereby mitigating the severe impact of these incidents on their lives.

This personal accident insurance industry is further expected to be driven by regulatory support, innovations in policy offerings, and the growing emphasis on financial planning and security. As the population becomes more cognizant of the unpredictability of accidents, the demand for comprehensive personal accident insurance policies continues to rise, making it a crucial component of the broader insurance market in India.

GROWTH DRIVERS FOR HEALTH INSURANCE INDUSTRY Under-Penetration of Health Insurance

The under-penetration of health insurance in India persists due to a combination of factors, including a widespread lack of awareness about the benefits of insurance, affordability challenges for a sizeable portion of the population, particularly in the informal sector, and a rural-urban divide in access and awareness. A significant proportion of the population, approximately 31% or 40 crore people, lacks health insurance coverage, creating a substantial opportunity for the entire health insurance industry to expand and bridge this coverage gap. (Source : https://www.business-standard.com/finance/personal-finance/health-protection-gap-persists-in-india-40-crore-uninsured-report-123121400799_1.html)

Favourable Demographics

India, with 17.76% of the worlds population, holds a prominent position as the most populous country globally, emphasising the vast demographic landscape within the nation. As of 2023, around 36.3% of Indias population resides in urban areas, reflecting a shift towards urbanisation. Simultaneously, the median age stands at 28.2 years, indicating a predominantly young population structure. The combination of a significant population, urbanisation trends, and a young median age collectively fuels the rising demand for health insurance in India.

Economic Landscape

The Indian economy has demonstrated remarkable resilience in the face of significant global challenges, underscoring its robust foundation and growth potential. Despite headwinds from international economic uncertainties, India achieved substantial economic expansion, driven by strong domestic demand, vibrant investment activity, and a surge in infrastructure spending by both Central and State Governments. Key sectors, particularly construction, have benefited from increased government focus, fuelling economic growth and, consequently, boosting the purchasing power and financial security awareness among the population. This favourable economic environment creates a fertile ground for the health insurance industry, as more individuals and families seek to protect their health and financial well-being through comprehensive insurance coverage.

Regulatory Environment

The regulatory landscape in India has evolved significantly, with the Insurance Regulatory and Development Authority of India (IRDAI) implementing a series of forward-looking reforms aimed at enhancing the agility and resilience of the insurance sector. Key reforms include streamlining the product launch process through faster approvals, revising expenses of management regulations, and amending commission payment regulations to move toward a principles-based regulatory regime. These changes are designed to foster innovation, increase operational efficiency, and expand market reach. Moreover, IRDAIs initiatives, such as the Risk-Based Supervision (RBS) framework, underscore a proactive approach to risk management, ensuring the sector remains robust in the face of emerging challenges. Collectively, these regulatory advancements are positioning India as a global leader in insurance, creating a supportive environment for the health insurance industry to thrive and adapt to the dynamic needs of consumers.

Heightened Health Awareness and Escalating Medical Cost

Increasing health consciousness, a proactive approach to preventive healthcare, and a deeper understanding of the financial implications of medical emergencies are driving heightened awareness of the importance of health insurance. This awareness not only prompts individuals to prioritise health insurance but also contributes to a broader societal shift, emphasising the significance of financial protection against healthcare expenses. With rising medical costs of 14-15%, people are increasingly aware of the financial risks associated with unexpected health issues, leading to a surge in interest in health insurance coverage. Health insurance provides assurance to individuals and families that they can access necessary healthcare without facing severe financial repercussions.

Medical Tourism

The rapidly growing healthcare industry has not only enhanced the countrys global reputation in healthcare but has also bolstered its economy by generating substantial revenue from foreign patients seeking specialised and cost-e_ective medical treatments. Specialised hospitals, equipped with state-of-the-art facilities and expertise in various medical disciplines, cater to the diverse healthcare needs of patients from around the world. In the period between January and December 2023, approximately 6.87% of the total Foreign Tourist Arrivals (FTA), totalling 6.35 lakhs, visited the country for medical and wellness purposes.

Supportive Government Policies

The IRDAI introduced three major initiatives – Bima Sugam, Bima Vahak, and Bima Vistaar – aimed at increasing insurance penetration, particularly in semi-urban areas, rural towns, and villages. "Bima Sugam" serves as an online portal facilitating insurance purchases, offering portability features, enabling changes in insurance agents, and facilitating direct settlement of life, motor, and health claims with insurers. "Bima Vahak" focusses on being a women-centric insurance distribution channel, while "Bima Vistaar" acts as a social safety net accessible to all through the Bima Sugam platform, bundling life, health, casualty, and property insurance solutions.

In June 2023, the IRDAI broadened the "use-and-file" method to cover life insurance products, intending to provide consumers with more options and boost market reach. This approach, previously used only for health and general insurance products, enables insurance companies to launch new products first and then submit the required information to the regulator.

The IRDAI is focussed on establishing a principle-centred regulatory system, promoting business-friendly approaches, and proactively addressing risks through a Risk Based Supervision (RBS framework). IRDAI has approved several changes in reinsurance regulations. This includes reducing the minimum capital requirement for Foreign Reinsurance Branches (FRBs) by half, from 100 crore to 50 crore. Moreover, the amendments allow the repatriation of any extra assigned capital. Such amendments to reinsurance regulations aim to position India as a global reinsurance hub, including reduced capital requirements for Foreign Reinsurance Branches and simpli_cation of reinsurance formats.

The insurance industry in India is gearing up for the adoption of IFRS 17 (or Ind AS 117) by April 1, 2025, with a phased implementation involving 15 identified insurers. While this may transform accounting rules, it is not expected to fundamentally alter insurers underlying financial positions.

Initiatives like Ayushman Bharat – Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) and state government extension schemes aim to provide health insurance to low-income households, achieved a significant milestone with the issuance of 30 crore Ayushman cards as of January 12, 2024, with 42% held by women.

As of March 2024, the IRDAI has introduced eight new principle-based consolidated regulations designed to create a supportive regulatory environment, protect policyholder interests, and encourage innovation and growth in the insurance industry. These regulations include crucial areas such as rural and social sector obligations, electronic insurance marketplaces, insurance products, and corporate governance. The regulatory revamp consolidated 34 existing regulations into six and introduced two new ones. Extensive stakeholder consultations have enhanced clarity and coherence in the regulatory landscape. The changes streamline processes, promote transparency, efficiency, and sound governance practices across the insurance sector, and drive the growth of health insurance.

Strategic Collaborations

Tech-led customer acquisition, particularly through collaborations with online aggregators, has emerged as a significant growth driver for the health insurance industry. Insurers are leveraging digital platforms and online aggregators to reach a wider audience and simplify the insurance buying process for customers. This approach offers a more accessible and convenient means for individuals to compare various health insurance plans, understand coverage options, and make informed decisions. The use of technology not only enhances customer engagement but also facilitates quicker and more efficient policy issuance. Additionally, the partnership with online aggregators enables insurers to tap into the increasing digital literacy of the population, fostering a seamless and user-friendly experience that contributes to the overall expansion and dynamism of the health insurance sector.

Advancements in Insurtech

Technological innovations are reshaping the way health insurance is conceptualised, accessed, and managed. Insurtech solutions, ranging from digital platforms to artificial intelligence and data analytics, are streamlining processes, enhancing customer experiences, and facilitating more personalised and efficient healthcare coverage. The integration of wearable devices, telemedicine services, and digital health platforms is fostering a proactive approach to health management, encouraging individuals to monitor and improve their well-being. Moreover, these technological advancements not only simplify the insurance application and claims processes but also enable insurers to tailor coverage based on individual health data. As the insurtech ecosystem continues to evolve, it not only meets the evolving expectations of tech-savvy consumers but also acts as a catalyst in driving the overall growth and accessibility of health insurance, ensuring that it remains relevant and responsive to the dynamic healthcare landscape.

Increase in Lifestyle Diseases

A considerable portion of the population in India, about 10.1 crore individuals with diabetes, reflects the prevalence of lifestyle diseases. Given the potential progression of these conditions into terminal illnesses, there is an increased inclination towards opting for health insurance as a prudent financial safeguard.

COMPANY OVERVIEW

Star Health & Allied Insurance Company Limited (hereafter referred to as ‘the Company or ‘Star Health) has maintained its leadership position as the largest standalone health insurer in India. The Company retained its leading position among private health insurers, securing a market share of 59% during the year under review. As of March 31, 2024, the Company had a branch network that was 3.40 times larger than the second-largest non-public health insurance provider.

As of March 31, 2024, the Companys extensive distribution network comprises of 881 health insurance branches and over 1,700 customer touchpoints, reaching across 25 states and 5 Union Territories in India. Additionally, Star Healths existing branches were complemented by an extensive network of over 728 Sales Managers Stations (SMS) and 7,883 Sales Managers.

Star Health has successfully expanded its reach across India, specifically including 17,106 out of over 19,000 + PIN codes through its wide-reaching sales distribution network. Individual Agents comprised about 84.66% of the Companys total GWP. Banks and other corporate agents have also contributed significantly to the Companys total premium income (GWP). Other distribution channels included direct online sales through telemarketing and the Companys website, brokers, insurance marketing firms, and web aggregators. Star Health achieved a notable distinction by operating with the lowest Expense of Management (EOM), a figure well below the IRDAI-mandated limit of 35% during FY 23-24. This ongoing excellence reflects the Companys dedication to delivering outstanding performance in the healthcare industry.

The Company has the largest agency network characterised by the highest agent productivity among all SAHI companies. The

Company distributes health insurance policies through individual agents, constituting over 84.66% of its Gross Written Premium (GWP) in FY 23-24. The total count of individual agents exhibited a CAGR of 11.96%, rising from 0.63 million in FY 22-23 to O.70 million in FY 23-24.

The Company has imparted training to a large number of individual agents, reaching 0.38 million, which represents an impressive 53% of the total individual agent count in FY 23-24. The additional distribution channels included direct online sales, brokers, insurance marketing firms, and web aggregators. The agency distribution channel also incorporated corporate agent banks and other corporate agents, contributing 7357 million and 257 million, respectively, to the Companys Gross Written Premium (GWP) in FY 23-24.

The Companys diverse range of coverage options includes retail health, group health, personal accident, and overseas travel, constituting 91.46%, 7.12%, 1.39%, and 0.04% of the total GWP in FY 23-24. The Company tailors its product offerings to a diverse range of customers, including individuals, families, students, senior citizens, and those with pre-existing medical conditions. This strategy is designed to effectively serve the wider middle-class consumer base. The Company has consistently held market leadership in the non-public health insurance sector for new branch openings over the past few years, showcasing its sustained growth.

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

FY 23-24 Business Highlights

The Companys product portfolio includes family floater products, individual products tailored to individual needs, and specialised products designed for customers with pre-existing conditions. The Companys creative product development process, coupled with market analysis and addressing coverage gaps, has led to the creation of specialised products. The Company, drawing on its robust claims processing expertise, has managed approximately 10 million claims from its inception until March 31, 2024. "From FY 17-18 to FY 23-24, the Company has successfully launched around 50 new products, including various policy variations. Key contributors to the Companys retail health business include the Family Health Optima Insurance Plan, Star Comprehensive Insurance Policy, Star Health Assure Insurance Policy, Young Star Insurance Policy, collectively accounting for 85% of the Companys retail health business."

Star Health has successfully introduced its Home Healthcare programme in 34 cities. Clients can avail Home Healthcare services by interacting with Star Healths doctors and medical professionals through telemedicine. Star Health has introduced the new Star Wellness app, incorporating additional condition management programme. The number of customers utilising the wellness services in FY 23-24 stood at 27, 681, which has recorded a substantial growth of 1824% comparing to FY 22-23 which was 1439%. Star Healths mobile application, which was introduced with new features in FY 23-24, has been experiencing a notable surge in traction, with a growing number of registered users availing benefits of the apps. App downloads surged by 174% in FY 23-24, surpassing 5 million downloads during the year.

Star Healths digital business has significantly contributed to its overall Gross Written Premium (GWP), contributing about 7% of the total GWP. The growth of digital channels, including both proprietary channels and third-party aggregators, has been robust, exhibiting a healthy 33% increase in fresh premium growth. The recent introduction of dynamic QR codes on all policy renewals and digital platforms ensures a streamlined process for customers, allowing them to renew policies effortlessly with a simple click. This innovation is anticipated to result in cost savings related to collection expenses.

The expansion of the Bancassurance segment, marked by the establishment of an open architecture, has substantially fortified their growth with 51 partnerships in the banks and NBFC segment. At present, this channel constitutes about 4.99% of their Gross Written Premium (GWP), showing robust growth that surpasses 30.79% in new business.

Star Health has been awarded its offcial certification for ISO:27001 for the Information Security Management System (ISMS) and ISO:22301 for the Business Continuity Management System (BCMS). These certifications endorse Star Healths dedication to safeguarding sensitive customer information and guaranteeing seamless business continuity.

Bharat Focus

Star Healths commitment to accessibility includes multiple channels, enabling the Company to cater to the diverse needs of both urban and rural markets in India. The Company went deeper and wider in the semi-urban and rural geographies and increased penetration with:

• Approximately 728 Sales Manager Stations that serve as small individual service centres, with plans to establish 1,000 more.

• Leveraging its 881 branches, the Company has now created over 1,700 customer touchpoints to ensure better customer service.

• Star Health is proud to have a presence in 17,106 PIN codes across India, covering a vast majority of the countrys 19,000+ PIN codes.

Innovation : Wellness

Star Health continues to bring innovative product offerings, catering to diverse customer needs, that cover a wide spectrum of pre-existing ailments and vulnerable sections of society, including people with special abilities, autism, and cancer. All products now also cover AYUSH treatments and mental health. The Companys telemedicine and wellness programme proactively support customers health management needs, complementing its insurance products by building on its commitment from ‘illness to wellness.

• Home Healthcare Services: In 34 cities, Star Health customers can take advantage of the home healthcare program, receiving personalised services from a team of doctors and medical professionals right at their doorstep.

• Prevention & Wellness Initiatives: Offerings in Preventive Health Checks surged by 250% in FY 23-24, and telemedicine usage saw a 45% increase this year, indicating growing customer engagement. The Condition Management Program (CMP) has also continued to gain widespread adoption.

• Customer App Upgrade: The revamped Star Health app, launched in August 2023, has garnered significant traction. App downloads surged by 174% in FY 23-24, surpassing 5 million downloads.

Governance Framework : ESG Focus

The Company has also ensured that governance and sustainability remain a business priority while driving accelerated growth. Star Health is ISO certified for Business Continuity and Information Security. Star Health has secured a score of 43 in its first year of participation in the S&P Global Corporate Sustainability Assessment 2023.

RISK MANAGEMENT

The risk management process implemented by the Company serves to safeguard its business. Business owners within the Company actively identify and address key risks within their specific domains, implementing mitigation plans as necessary. Regular monitoring of the risk landscape, mitigation strategies, and their status is consistently undertaken. Each department operates based on a standard operating protocol aligned with a regularly reviewed business continuity plan, ensuring the ongoing effectiveness of risk management measures. Company has implemented comprehensive risk assessment frameworks, identified key risk areas, and developed robust mitigation strategies. By continuously monitoring and managing risks, the Company has maintained robust operational resilience and safeguarded shareholder value. Proactive approach to risk management reflects the dedication to sustaining long-term success and adapting to an evolving business & regulatory landscape.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has established an internal control system that includes Entity Level Controls (ELC) and Process Level Controls (PLC), tailored to the size, scale, and complexity of its operations. The system provides reasonable assurance regarding the achievement of the Companys objectives, including the reliability of financial reporting, effectiveness, and efficiency of operations, safeguarding of assets, and compliance with applicable laws and regulations. The Company maintains a robust control environment, which serves as a strong foundation for other components of its internal control system. Such an environment aids in the identification and assessment of risks, followed by facilitating the implementation of corrective measures.

The Company employs risk and control matrices (RACM) and risk control self-assessment (RCSA) to document action plans for identified risks.

Every quarter, a report detailing identified risks, along with management action plans and specified timelines, is presented to the Audit Committee for assessment. The Internal Audit Department conducts monitoring activities, periodically reviewing risks and controls to strengthen and enhance the effectiveness of the existing control system.

HUMAN RESOURCES

The Company empowers its workforce by aligning their training with individual skills, recognising the pivotal role of employees quality in achieving success. The Company prioritises the need for accurate information and the right strategy to continually improve and modernise HR processes, thereby promoting overall business growth. It grants employees the authority to continually adapt to evolving technological landscapes. Throughout the year, the Company conducted various training programmes encompassing technical, behavioural, business excellence, general management, advanced management, leadership, customer orientation, safety, values, and code of conduct. As of March 31, 2024, the Companys workforce comprised 15,913 employees.

CAUTIONARY STATEMENT

The Management Discussion and Analysis section contains your Companys objectives, projections, estimates and expectation may constitute certain statements, that are forward-looking within the meaning of applicable laws and regulations. The statements in this management discussion and analysis report could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operation includes raw material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in the governmental regulations, tax regimes, forex markets, economic developments within India, and the countries with which the Company conducts business and other incidental factors.