Here’s why risk-taking has worked well for Star Health Insurance

© M Saraswathy
Here’s why risk-taking has worked well for Star Health Insurance

The Covid-19 outbreak and subsequent lockdown led to many general insurers’ business stagnating. Core segments such as motor insurance have been pushed into the background as vehicle sales plummeted.

Amidst this pandemic, however, there is one general insurer that has not only seen a substantial improvement in its market share in 2020 compared to the previous year, but has also set ambitious targets for FY21.

Star Health Insurance, the country’s largest standalone health insurer (with 52 percent market share), is now the country’s fourth-largest private insurer in the non-life space. It had a market share of 4.36 percent as of August 2020.

A year ago, it was the sixth-largest insurer but the Covid pandemic and the resultant scramble to purchase health insurance has pushed it up two slots since then. Anand Roy, Managing Director of Star Health Insurance, told Moneycontrol in an interview that the company is targeting a premium of Rs 10,000 crore by the end of FY21.

The insurer is targeting 6 percent market share by the close of this fiscal year, added Roy. In the total business, 10 percent will be group business while the rest would be retail.

That is 46 percent YoY growth in premium collection. The non-life industry, as a whole, has seen only 4 percent growth in premium collection so far. Standalone health insurers have seen 26 percent YoY growth (as of August 2020).

So far, Star Health has 30 percent market share in retail health and is bigger than even the state-owned general insurers.

“Awareness about health insurance rose after the Covid-19 outbreak. Younger people are keener to buy health insurance now. The standard Covid-19 product has also been popular. Our growth is a combination of all these factors,” said Roy.

What worked for Star Health?

In June 2006 when Star Health Insurance commenced business as the country’s first standalone health insurer, it was entering a space that was considered risky as far as underwriting is concerned. There was no proper data on disease-specific claims and issuance of policies was lengthy.

“When we were set up 15 years ago, we were very clear that the company would not be following the same old style of selling insurance. We wanted to ensure that more people get coverage and hence we went a step ahead and started covering people who would traditionally be denied health insurance,” said Roy, who has been associated with the insurer since its inception.

Roy, who has two decades’ experience, having worked with firms such as ICICI Lombard, American Express & ANZ Grindlays Bank, has held several leadership positions at Star Health. These include Joint Managing Director, Executive Director and Chief Marketing Officer. He also helped Star Health launch three principal services — health, personal accident and overseas travel Insurance — for individuals, families and corporates.

Typically, be it cancer, diabetes or cardiac disease, only healthy individuals are offered medical insurance covers by the industry. However, Star Health covers those who have these ailments.

“We are able to do a thorough underwriting of these individuals and price the risk accordingly. We also have an in-house team to handle claims, with doctors on board, so that there is no need to rely on third-party administrators,” added Roy.

Star Health is a fully private-equity led company, the only such company in the industry. WestBridge Capital, ace investor Rakesh Jhunjhunwala and Madison Capital are its shareholders.

How Star handled Covid and allied claims

Roy told Moneycontrol that the company had undertaken a digital transformation project about two years ago and this helped Star Health tide over the Covid lockdown. Compared to about 30 percent of policies being issued online prior to the lockdown, he said Star Health now issues 75 percent of its policies online.

Even the doctors in the company worked from home to ensure seamless issuance of policies and claims settlement.

Unlike other insurers, Star Health had in 2019 done away with the requirement of medical tests irrespective of the age group and sum insured for the purchase of medical insurance. This made the transition to remote working easier, according to Roy, since customers only had to undergo tele-underwriting.

“There is a perception that this will lead to higher losses. But that is not the case since our doctors do a thorough call with the customer to find out about the medical history,” he added.

Even with Covid, Roy said that Star Health’s combined ratio is similar to the previous year. According to the insurer’s public disclosures, the combined ratio for H1FY20 was 111 percent.

But being the largest health insurer in the country comes with its own set of risks. Roy said that the company has received 45,000 Covid-19 claims worth Rs 500 crore. About 80 percent of them have been settled.

“While we have received a substantial number of claims, this is as per our projections. However, what is worrying is that hospitals are overcharging. The average Covid-19 claim is double of a regular claim because of the high rates charged by hospitals coupled with the longer duration for treatment,” he added.

Roy said that Star Health Insurance is now in discussions with its network hospitals to get some consensus on following standardised rates. He added that even though State governments have issued directions on treatment charges, hospitals are not following them.

Even before the insurance regulator asked companies to bring out standard products, Star Health had launched a coronavirus-specific policy and started covering Covid-19 hospitalisation. Roy said that Star Health has also sold 400,000 Corona Kavach and Corona Rakshak policies, which are the standard Coronavirus specific covers.

But why go a step ahead at a time when insurers were hesitant to cover the coronavirus?

“We are a commercial business. At the time of a pandemic if we aren’t able to offer health insurance, then what is the use of being in the business? That is also a reason why we have been able to see growth,” he added.