The Narendra Modi-led government has made a comeback in India. For healthcare, its second-term return greenlights an ambitious health insurance scheme—Ayushman Bharat. The government, over the next five years, intends to provide health insurance cover to the 500 million poorest in the country. Meanwhile, private insurers have a plan of their own. To boost the most profitable kind of health insurance—the one that individuals buy.
There is tremendous scope for health insurance in general to grow, but individually-bought health insurance is the most unpenetrated market right now. Indians with disposable incomes have opened their wallets for fast-growing industries such as e-commerce and fintech over the past five years. Investors are now betting that the next five will be the right time for insurance, especially health, to become a want. Not just a need that corporations and the government traditionally provide.
Divya Sehgal, an investor, goes as far as using American psychologist Abraham Maslow’s ‘hierarchy of needs’ pyramid theory to explain the motivation behind investing in health insurance. Sehgal is a partner with the PE firm True North which bought a 51% stake in insurer Max Bupa in February this year.
Now, according to Maslow’s theory, once the human needs for food, shelter and clothing are met, safety comes next. “Every person would spend more on premium to cover themselves from basic risks,” Sehgal says. Insurance, particularly health, may have been a low priority for Indians up until now (as it is an evolved need), but this would change as purchasing power rises, he expects. The evidence supports the hypothesis. Life, motor and other general insurances are not as high a priority on Maslow’s pyramid, and so, they’re seeing relatively slower growth.
This vision isn’t limited to Sehgal either. A consortium, led by Mauritius-based investment firm WestBridge Capital and Indian billionaire Rakesh Jhunjhunwala, got approval from the government’s statutory body Competition Commission of India (CCI) to buy over 90% stake in health insurer Star Health in April this year. Similarly, private equity TPG-backed hospital chain Manipal Hospitals bought out the 31.5% stake of Indian business group TTK from Cigna TTK health insurance, resulting in a name change to Manipal Cigna in the first week of this month. HDFC Ergo general insurance, meanwhile, has been in discussion to buy a stake in health insurer Apollo Munich over the last few months, said an employee of the insurance company. Reliance Capital got approval for a health insurance company back in October 2018. According to two persons in the know, the Mumbai-based conglomerate Bajaj Group (that operates Bajaj Allianz General Insurance) has, since 2001, been planning to launch a standalone health insurance company. However, the company itself hasn’t confirmed this.
All of them expect younger Indians to fall sick more often as time progresses. They realise the importance of health insurance—inpatient and outpatient.