Budget proposals for healthcare sector will benefit health insurers in terms of claims ratios and prices, says Star Health CFO

Nilesh Kambli, Chief Financial Officer, Star Health and Allied Insurance | Photo credit: Sai Krithi R _12401

The Union Budget for 2026-2027 has given utmost importance to the healthcare sector by increasing budgetary allocations, proposing key initiatives and programs and exempting basic customs duties on cancer medicines. How would non-life insurers benefit from these measures?

Most importantly, Finance Minister Nirmala Sitharaman acknowledges that there is inflation in the market. She has proposed the Biopharma SHAKTI with an outlay of ₹10,000 crore, which will ultimately have an impact on reducing pharmacy costs in the country. This is a welcome move. Reducing customs duties on 17 cancer-related medicines is positive for the insurance industry as it reduces the cost of claims for us. All these initiatives will help us in terms of our claims ratio and the pricing we offer to the customers. Nowadays the price of insurance is based on the damage costs. The government’s measures will further improve the affordability and availability of health insurance.

Star Health and Allied Insurance’s Expenses of Management (EoM) ratio rose 211 basis points year-on-year to 33.95 percent in the third quarter of this fiscal. Why has it increased? What is the outlook for the end of FY26?

The legal limit is 35 percent. So we are well within the limit. Firstly, there is a loss of VAT income tax. From September 22, we will no longer get GST input tax credit. Some of it relates to our intermediaries, agents, brokers, corporate agents; we can pass it on to them. Whatever payments we make include GST. But our own operational expenses, in terms of our IT costs, rent, electricity, all those things we have to pay GST. So that is an additional impact that has occurred during this three and a half month period. That is an additional burden of about Rs 65-70 crore for GST purposes. Second, when we write long-term products, such as a three-year retail health policy, selectively for good brokers, we pay a commission up front. So even though the GWP (Gross Written Premium) is only 1/3 for a three-year policy, the commission payment we make is recorded in advance in the accounts. And we do it consciously, because we operate well within the EoM objectives of 35 percent. Moreover, these are good companies and we want to promote good brokers.

Typically, about 35 percent of business happens in the fourth quarter. So we have to stay well within the IRDAI limits for management costs. We shouldn’t have a problem.

How did the GST exemption on individual healthcare premiums help the company grow its retail healthcare segment in the third quarter? How much has the average ticket size increased?

In private health insurance, we have achieved a growth of 60 percent in the fresh sector (due to new customer acquisition) with a volume growth of 23 percent compared to the previous financial year. And based on overall retail health (fresh plus renewal), we achieved 27 percent growth in terms of GWP in Q3 2026. This growth was largely driven by the GST exemption. If you look at the average ticket size compared to last financial year, we saw an increase of 11-12 percent in the third quarter. The average ticket size of policies is around Rs 22,000, against around Rs 20,000 in the previous year period.

In the post-earnings call, management said the company’s market share in the retail health segment stood at 31.3 percent for the nine months of FY26. What was the change from year to year? How does the company intend to further grow this market share over the next two to three years?

In the period a year ago, our market share was 32.2 percent. So we’ve lost market share by about 1 percent year over year. We work with strict acceptance guidelines. We work with the philosophy of growth with profitability. So wherever we think these are loss-making locations, where we see the impact of fraud, waste and abuse is greater, we reduce activity. In some parts of Delhi and some parts of Gujarat, we are actually downsizing our operations. And that’s by design. Where we see that profitability is not there, we are happy to let go of market share. That’s how we approach the business.

The company is the market leader in the private health insurance segment. Where do you see the company able to grow further in the future?

We see that the Northeast region is underexposed. We want to ensure that we achieve good growth in that region. Also, a large part of the semi-urban and rural markets will remain underutilized – in the southern and eastern areas. We believe there are good growth opportunities in these areas. For us, about 50 percent of the companies typically come from semi-urban and rural areas. And we are improving our penetration in these locations.

Published on February 2, 2026