Budget 2018: How Indian insurance sector is going to benefit from the mega healthcare plan?

A recent report presented by S&P Global Ratings has revealed that the mega healthcare plan announced in the Budget 2018 might prove to be a game changer for not only for the Indian healthcare scenario. The healthcare scheme is also expected to generate substantial growth in insurers’ premiums.

According to the S&P report, the insurance sector is likely to receive a boost upon the implementation of the NHPS scheme, since it reflects the government’s intent to expand the country’s protection umbrella. The report also indicated that the recently announced health scheme is bound to have some far-reaching implications for the domestic insurance sector.

We believe the proposal has the potential to be a game changer for the health industry based on its sheer coverage size and scope. An effectively executed National Health Protection Scheme (NHPS) will bring coverage to 40 per cent of the population and generate substantial growth in health insurers’ premiums and increased cross-selling opportunities,” said S&P in its report.

The healthcare scheme, which was announced earlier this month in the Union Budget 2018-19, is being speculated to be the world’s largest government healthcare programme. The scheme aims at providing medical cover of up to Rs 5 lakh to more than 10 crore vulnerable and poor families, which form about 40 per cent population of India.

Apart from the mega healthcare scheme, the government has also proposed in the latest budget to merge three public-sector insurance companies. This should reduce competition and facilitate improved underwriting discipline in the domestic market. The 3 insurers – United India Insurance, National Insurance and the Oriental Insurance – together contribute around 30 per cent of market share of the non-life-insurance market in India, with a premium book of more than Rs 40,000 crore.

Trupti Kulkarni, Credit Analyst at S&P Global Ratings, said, “We expect insurers to introduce a range of new products with healthier coverage to capitalize on increased tax incentives amid rising medical inflation. A merger of three big public insurers in India will improve the sectors overall profitability by reducing competition.”

She added, “In our view, less competition will facilitate improved underwriting discipline, enhanced risk retention, and better managed solvency levels in the Indian insurance market.”