I think we have to wait and see the impact. Primarily, the life insurers have couple of large synergies selling health: same distribution network (agents) and same customer. However, they still start with a massive disadvantage. Indemnity health insurance is a fundamentally different product than life. Lot more service oriented vs life which is more sales oriented. SAHIs have built their service networks over time:
- Large network of hospitals servicing claims. Ability to do cashless claims at these hospitals. Further, due to the large volume of treatment coming through a large insurer such as Star, they are able to negotiate better rates at these hospitals. Building this up will inevitably take time for any new entrant.
- Inhouse claims servicing: helps in reducing frauds, identify right treatments and costs. Helped by data analytics due to large number of claims being serviced.
- More volumes = more data around claims and underwriting = ability to underwrite better. We have partly seen this with Star even having policies for people with pre-existing diseases.
- Given the above and given that as of now commissions to agents are capped at 15%, I dont see why any existing SAHI agent would chose to underwrite an indemnity policy from a life insurer rather than a SAHI such as Star.
It is likely that for a life insurer to be successful selling indemnity policies, they will have to endure underwriting losses (due to high claims and high opex initially) for many many years while they build up these capabilities. Obivously this is difficult to do in a public market setting. We also have to remember that life insurers were allowed to sell indemnity policies till a few years ago and were scarcely able to make a dent.
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