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00:00 Star Health and Allied Insurance Company Limited is in focus.
00:04 The company has announced that it has been granted registration by IFSCA
00:08 to establish an IFSC International office at the Gujarat International, that is Gift City.
00:14 The company plans to commence its operation with a branch in Gift City by the end of March 2024.
00:20 The company will offer non-resident Indians focused insurance that caters to the needs of the global Indian Star Health Insurance
00:28 and will also be able to attract foreign inward business as reinsurer.
00:32 The company will provide insurance for Indians going abroad and India's growing international student community.
00:39 To discuss this further and to understand the synergies we have with us Mr. Neelesh Kamble,
00:44 CFO of Star Health and Allied Insurance Company Limited. Welcome to NDTV Profits, Sir.
00:51 Sir, my first question to you is that what is the kind of size of market that you're looking at
00:58 through this particular Gift City branch that you'll be opening
01:02 and what are the kind of synergies that you'll expect from this particular expansion?
01:06 See, when it comes to international business, we see that this can easily be 4 to 5 percent
01:12 of our overall business in the coming years. It's a very big opportunity and it's creating
01:18 the market rather than capturing the market. There are a lot of NRIs who are wanting to come
01:24 back to India and who want health insurance cover so that there is continuity of benefits.
01:28 We see a huge business potential for this. There is some kind of business which is currently done
01:33 but there are a lot of regulatory issues. But through Gift City, it can be seamless experience
01:38 for the customers. We see a lot of medical tourism in India from Middle East, African countries as
01:44 well as Southeast Asian countries. It's a very good opportunity for these patients to come to
01:50 India and with Star Health's extensive hospital network, the kind of knowledge and experience
01:56 that we have, it will be a win-win situation for both the customers as well as for us. So,
02:01 we see a big opportunity when it comes to the Gift City operations.
02:04 Right. And what are the kind of margins that you'll be expecting out of this particular
02:10 branch? Will it be margin accretive? What do you think?
02:14 Yes, absolutely. So, in terms of margin, yes, definitely it can operate anywhere between 90%
02:21 to 94% combined ratios. It will give a healthy 5% to 6% margin as well as the cash inflows
02:27 which will help in generating the investment income. So, it will be in line with our existing
02:31 business operations. Right. And what are the kind of loss ratios that you're aiming at from
02:38 this particular portfolio? So, it depends upon the kind of business that we are writing. The
02:43 retail businesses should operate at a lower loss ratio when it comes to reinsurance in world
02:46 business from foreign countries. The loss ratios will be higher but there will be no operating
02:51 cost or the cost of intermediation. So, based on the kind of business as well as the kind of
02:59 customers that we write, it will be a combined ratio that we spoke about.
03:04 Right. Mr. Kamli, I have a more macro-based question. Well, the IIDA has issued final
03:13 regulations for BIMA, SUGAM. How will this change the landscape of insurance sector in your opinion?
03:19 Yeah, it's a very good question. See, what the IIDA is looking at? It's looking at affordability,
03:25 availability and accessibility of insurance to the population of India. When it comes to health
03:31 insurance, India continues to be an under-penetrated market. So, what the regulator is doing to BIMA,
03:36 SUGAM is it is creating accessibility of health insurance by creating an online platform.
03:40 You know, it's ensuring that the insurance is available to the end customers. It will also
03:46 have a service infrastructure. You know, health insurance has suffered a lot because of the lack
03:50 of customer trust. So, through the service infrastructure where the hospitals will also
03:55 be on the platform, the digital health records of the customers will also be on the platform,
03:59 there will be an elimination of customer distress in the industry. You know, the rejection, the
04:06 delays in settlement of claim through anywhere cashless facilities, which will also be available
04:10 on this platform. You know, so it will create availability, accessibility, as well as
04:14 affordability of customers. You know, insurance is a law of large numbers. As more and more customers
04:19 get into this platform by health insurance, it will also lead to affordability of health insurance.
04:25 So, it's a very big objective forward looking and it will ensure that the health insurance will
04:30 have a long run of growth over the years. Right. But in terms of star health insurance,
04:35 do you think that because of this, there will be some kind of market loss, I mean, share of market
04:41 loss? No, absolutely not. You know, health insurance continues to be a push product. You
04:46 know, it requires a lot of customer engagement. That is why till today, when it comes to health
04:51 insurance for retail customers, 72% of the business is through the agents. For us, it's
04:56 close to 82%. So, the agency, the intermediaries will also be on this platform, which they will
05:03 engage with the customers, which will create transparency as well as it will be, you know,
05:08 help in expanding the market. So, we believe that it's a very good opportunity for a player like
05:12 star health, which has a huge distribution network to further its growth targets.
05:18 Right. But from what I understand is that star health has been losing its market share. So,
05:22 do you think that this will further add on to losing the market share or it will benefit you?
05:27 So, I'd like to clarify, you know, today star health is around 33% market share.
05:32 It continues to grow in line with the market. So, last year we had 34%, 5 years back we had 26%,
05:38 2 years back we had 31%. So, we continue to improve on the market share. This year,
05:42 it's a year of transition where we have taken a base price increase. So, for this year,
05:46 we are going in line with the market. But the kind of changes that we have done with the
05:50 focus on quality business, last three months have been really good for us. And we see a bigger
05:55 runway of growth in the coming years. We'll maintain our market share or continue to improve
05:59 on our market share going forward. Right. And Mr. Kamli, can you guide us on loss and
06:05 combined ratios for FY25? Because the risk that is deemed in will, you know, see loss ratios come off.
06:13 So, what is the guidance for FY25 then? Yeah. So, I'll not like to give a guidance on the
06:19 combined ratio, but the initiatives that we have taken, you know, focus on quality business,
06:23 we see very good results. The price increase that we have taken is showing good results. Jan to March
06:28 is our biggest quarter. Okay. The price increase benefit in terms of earned premium will continue
06:32 to flow in 24-25. The kind of changes that we have made in our EOM structures, all that is paying up
06:40 really big dividends for us. And we see that the normalized financials will be, I mean, the normalized
06:46 PAT will be for 24-25. In terms of IFRS, which is, you know, the new standard that is coming in,
06:52 we expect ROEs of 19-20%. That is basically on the deferment of cost basis. Okay. And you have
07:00 planned and taken price hikes in FY24. Now, tell us about the extent, timelines and the potential
07:05 impact that the portfolio has seen overall. See, we have taken a price increase, so we are
07:13 getting a good premium yield of 25%. The renewal of the portfolio is in line with our expectation.
07:18 We are expecting some losses, I mean, the loss of business because of this, and that was built
07:23 into the price increase. So, it is exactly in line with our expectation. We continue to monitor all
07:27 of our portfolios. We plan to take price increase in our certain other portfolios, which is around 10%.
07:33 And now, with the inflation coming back to normalcy, the price increase will be close to 15%.
07:38 This was a bigger price increase post-COVID that we had to take. So, price increase in FY25 is 15%,
07:45 that's what you're saying? Yeah, for 10% of our portfolio. Okay. All right. And you've spoken
07:52 about risk-first growth later. And how are you strengthening your underwriting processes,
07:58 one thing? I mean, if you can tell us more about how it has changed over the last quarters and
08:02 where it is headed? Yeah. So, what we said is we focus on quality business. And that's the reason
08:09 where we... So, with 16 years of experience, we know which areas are fraud prone, there is
08:14 abuse and wastage that is happening. We have identified the portability business in certain
08:22 categories was giving higher loss ratios. So, we have abstained ourselves from writing those
08:26 businesses. And that is where we have focused on quality business. What it has done is, it has led
08:32 to a reduction in our rejections as well as grievances as well. So, it is giving us huge
08:36 benefits. The portfolio is now realigned. We started this process in April last year. It's
08:41 typically one-year policies. So, from April onwards, we see that the base is set and we'll get
08:47 a larger benefit out of it in terms of the overall growth rate as well as the loss ratio and customer
08:52 service initiatives. Right. And the net earned interest in 9 months FY24 saw 14% growth. Now,
09:01 do you expect the growth to moderate in FY25 or it will sustain at the same rate?
09:06 So, the investment yield continues to be very strong for us. With the rising interest rate,
09:13 we have seen a good improvement in our portfolio. We have realigned our portfolio also with
09:17 investments in REITs, INVITs, quality papers. We see that it should not get impacted much.
09:24 Right. And what are the kind of expansion and growth plans that you're aiming at in FY25?
09:31 So, typically, we have 4 levers. When it comes to agency business, we continue to add close to
09:37 80,000 to 90,000 agents. We have 7 lakhs plus agents. And this is our biggest channel and it
09:42 will continue to grow in line with the market. Digital and bank channels are the biggest road
09:47 driver for us. When it comes to digital channels, we are adding infrastructure in terms of tele-sales
09:52 units, the spends on performance marketing. This business is growing at 35% plus. Today,
09:57 it is around 8% of our overall business growing faster than the overall growth rate.
10:03 When it comes to bank external channels, we have 40-50 plus partners. And this again,
10:08 the quality of the business is very good. 50% of the business comes through benefit,
10:12 50% through indemnity channels. It's a good profit-making business. And the current year
10:18 growth is around 35%. In terms of group business, we continue to focus on SME segment.
10:24 What we have seen is the mid-market customers, there is an improvement in rates. And this again,
10:30 business is doing well for us. So, it's firing on all cylinders when it comes to health insurance.
10:34 Right. And my last question to you would be that with regards to the new Sahi approval,
10:39 what is the kind of markets and what is the competition scenario overall?
10:45 See, we look at the market on an overall basis. There are 30 plus players, you know,
10:50 and the regulator wants that new and new players should come and expand the market.
10:54 So, with the kind of distribution and product segment that we have, we are happy that, you know,
11:01 everyone is coming and expanding the market and which helps a big player like Star Health.
11:05 Right. Well, Mr. Neelesh Kamble, thank you so much for speaking with us at NDTV Profit.