LIC may consider picking up a stake in a standalone health insurance company in its bid to expand in the health insurance sector.

LIC currently offers health insurance plans with fixed benefits. Once the proposed composite licence is allowed, the insurer can look at offering a wider range of health policies to its existing policyholders, including indemnity policies. The insurer is internally working on the details of the inorganic expansion.

In February this year, a parliamentary panel had recommended the introduction of a composite licence that will allow insurers to undertake, life, general or health insurance under one entity to cut costs and compliance hassles.

The proposed amendments relating to composite licences are currently awaiting parliamentary approval and market sources expect it to become a reality after the general elections.

“We will explore possibilities to have some stake in some standalone health insurance company. We are working on that and we will see what will be in the best interest of our customers as well as other stakeholders,” LIC chairperson Siddhartha Mohanty said at the earnings call on Tuesday.

Standalone health insurers — five in total — together recorded a 26.19 per cent year-on-year growth, underwriting a total gross direct premium of ₹33,115.95 crore during 2023-24 compared with ₹26,243.85 crore in 2022-23.

With a combined market share of 11.43 per cent as of March 2024, the growth rate of these specialised health insurers was faster than general insurers who also sell health insurance.

Two new registrations were recorded in the standalone health insurance sector in 2024 with the entry of Narayana Health Insurance and Galaxy Health and Allied Insurance, taking the total number up to seven.

According to market sources, with a 49.24 per cent stake in IDBI Bank, LIC, which primarily depends on its agents for the sale of policies, has made significant gains in the bancassurance distribution segment. A strategic stake in a standalone health insurer could also be beneficial for the growth prospects of the life insurer.

LIC has seen a dip in its market share both in terms of premium and in terms of policies in 2023-24. While the market share in terms of premiums was at 58.87 per cent in 2023-24, in terms of policies it was at 69.91 per cent. The corresponding numbers in 2022-23 were 62.58 per cent and 71.76 per cent, respectively.

“Despite our market share falling in both individual and group business, we continue to retain leadership in both segments of the Indian insurance industry. We chose to have profitable growth, rather than just market share,” said Mohanty.