Existing policyholders will opt for higher sum assured after GST exemption, says CFO of Star Health

In the post-earnings conference call, Star Health and Allied Insurance said in October that they witnessed nearly 50 percent growth in new business following the GST exemption on retail healthcare. Did the growth come from the acquisition of new customers? What growth do you see in November?

This GST change is a welcome move. With the VAT rate reduction of 18 percent, we see that the product is becoming more affordable. Demand in October was robust, with premium growth exceeding 50 percent. In terms of the number of customers, we saw that the growth was 25 percent and people are buying long-term plans. We also see good momentum in November. In November, growth was slightly lower: more than 30-35 percent in terms of premium. We don’t see this as pent-up demand; it appears to be a sustainable demand, especially given the change in customer behavior.

How do existing policyholders react to the 18 percent premium reduction? Do they go for a higher insured amount? What is the outlook for average ticket size at this budget end?

So there are two-three consequences. There is an increase in renewal rate or persistence by 2-3 percent. Existing policyholders opt for a higher sum insured because their ability to pay is still the same. We therefore see a clear improvement in the higher insured amount. We also see a clear improvement in the additional covers. There is a positive improvement in this area. And when you talk about a higher sum insured and higher additional coverage, this is a clear improvement in the average ticket size of the customers. The average ticket size at the end of the first half of this financial year (H1FY26) was around ₹19,000 to 19,500. We see that this could amount to around ₹20,000 by the end of the financial year.

What is your strategy regarding non-availability of GST Input Tax Credit (ITC) for distribution? How do you plan to mitigate the impact?

For intermediary commissions to agents, brokers and corporate agents, we, at the industry level, either as a major SAHI (Standalone Health Insurance) player or GI (General Insurance) player, have decided that the commission paid to the intermediaries will be exclusive of GST. The costs of 18 percent are therefore borne by the intermediaries. And we did this because there was already enormous management expense (EoM) pressure on the insurance company. The regulation says companies must control expenses within a certain threshold level, and that they must continue to decline each year for a certain period of time. So many companies were under pressure, and that’s where the decision was made. On the Opex side (operational costs), when it comes to IT costs, rental, courier services and printing, these are borne by the insurance company. So that is a very large impact, which will be absorbed by the insurance company. Another benefit arising from the GST reduction is the reduction in pharmacy costs.

The company has completely exited the group’s unprofitable employer-employee portfolio. To what extent will this help improve the loss ratio and combined ratio for FY26?

Actually a group of employer-employee. When we say we’re exiting, it’s a large employer-employee segment that we’ve exited. We continue to focus on the SME employer-employee sector, as the combined ratio there is still at our comfortable level of around 96-97 percent. It’s quite profitable. But in large companies we saw that the loss problem was quite significant and we lost some money. Being a very small part of our total business, this should have an impact of roughly 0.5 to 1 percent in terms of reducing the combined ratio.

Where was the market share in the private health insurance segment in the first half of this fiscal? How does the company plan to grow this over the next two to three years?

Our retail market share at the end of the first half of this financial year was approximately 32 percent, expressed in gross premiums. We are the market leader in retail healthcare. What we see is that the retail market is growing consistently. We are growing too. We want to focus on slightly improving our market share, but more focus is on profitability. If you just focus on market share, you have to do business in certain loss-making areas, certain loss-making regions, which we don’t want to do.