In the year 2006, the insurance industry was still budding; the lately-launched general insurance providers sold the basic insurance products for health and motor products.
In the aforementioned year, when the Star Health Insurance established a separate health insurance firm, the market players had a notion that it was a dodgy proposition.
There have been a lot of changes in the consequent 12 years and the brainchild of V Jagannathan – the former Managing Director and Chairman of United India Insurance, Star Health and Allied Insurance now has a skid of investors including Sequoia Capital, ICICI Venture, Apis Partners, TATA Capital Growth Fund, along with foreign investors including ETA Star of Dubai and Oman Insurance Company backing it.
Star health insurance is out on the block, reason being, its investors are looking for an exit. No doubt, the health insurance provider received interest from the WestBridge Capital, which teamed up with Rakesh Jhunjhunwala – a billionaire investor, along with Warburg Pincus, PremjiInvest, Bain Capital, apart from ICICI Lombard General Insurance for its stake.
The health insurance provider got into the market when purchasing a medical insurance cover was at its nascent stage. Star health insurance, being a specialist firm, its premiums has grown since the year of its inception.
While, at the time, insurance providers took 7 to 8 years to cope and report their gains, Star Health Insurance Company achieved the profitability in the FY 2008 itself. In the initial year of the inception, the health insurance company accrued net premiums of Rs. 4.8 Crore, which grew to Rs. 2739.6 Crore in the FY 2018.
It is the biggest standalone health provider in India with a premium collection of Rs. 4145 Crore in the financial year 2018, a growth of 40 percent over a year ago.
By the end of the financial year ending on March 31, 2008, the health insurance company posted a gain after deduction of tax of Rs. 1.2 Crore in comparison to a loss of Rs. 2.5 Crore in the year ago. After a decade, the net profit grew to Rs. 170.1 Crore as on the end of this FY 2018.
Standalone health insurance providers hold 5.5 percent of the market share. Out of this, Star health insurance holds around 2.75 percent making it the biggest unit in this space.
Likewise, the health insurance company has a strong claim management system.
Collective ratio presents an illustration of how well an insurer is able to administer claims with regard to the premium collected. On the contrary to its peers who’re bleeding, Star health insurance has a collective ratio of 93 percent. If this percentage is below 100, it indicates that an insurer has been posting underwriting earnings, which means its premiums accrued are more than the claims paid out.
Health insurance is a sector with higher claims. This is the reason for selecting risks has been a crucial factor for the general insurance providers. While the other insurance providers didn’t include the pre-existing conditions, the Star Health Insurance Company included individuals with cancer, cardiac illnesses, as well as diabetes. In fact, Star health was the first insurance provider to offer a cover against HIV.
According to S Prakash, the Chief Operating Office of Star Health and Allied Insurance, “the actual need of insurance is while contracting a major ailment.” He further added, “The market was seeking a product covering such ailments along with outpatient expenditure, mental health treatment, as well as dental treatment. We’ve been able to price it efficiently and effectively as we have a huge set of data.”
Overall, while the probability of health insurance has not seen multitude diversification, Prakash also said that they have a huge proportion of consumers porting into the firm from others.
Prakash, who himself is an authorized doctor said that the diagnosis beforehand, the onset of ailments such as cancer, can be controlled to a great extent and endurance of life has been seen.
Whilst the stake sale of the Star Health is at the end of the rope with WestBridge Capital said to be on the top in the race, industry whizzes said that the attainment can give an instant upside in the business of health insurance.
Apart from the motor third-party insurance that is mandatory, health insurance is the only insurance product that is bought by the individuals themselves.
Medical inflation is quoted to be at around 18-20 percent and a minor illness, which requires hospitalisation, would set one in the rear by Rs. 2 Lakh to Rs. 5 Lakh in a metropolitan city.
A solvency ratio of 177 percent aided by the good number on the top and bottom line has proven to be the best match for Star Health.
In a nutshell!
Star Health Insurance has made a remarkable place in the insurance sector with its outstanding claim settlement ratio and a number of grievances settled. This health insurer is considered among the best and most trusted health insurance providers in the country.