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Will LIC change the health insurance market in India?

Submitted by admin on March 28th, 2025

The Life Insurance Corporation of India (LIC), a name you’ve probably heard from your parents or grandparents when they talk about securing the family’s future, is now gearing up to step into something new—health insurance. Yep, the giant that’s been all about life insurance for decades is eyeing a big move, possibly by snapping up a chunk of a health insurance company like ManipalCigna. There’s even chatter about a “composite license” that could let life insurers like LIC sell health policies directly—though it might only be for private players, not the public-sector behemoth just yet.

So, let’s picture it: LIC dives headfirst into health insurance. What happens next? Well, it’s not like flipping a switch. They won’t just wake up one day and start selling health plans like they’ve been doing it forever. Health insurance is a different beast compared to life insurance—it’s trickier, messier, and needs a whole new playbook. LIC would need to bring in the pros: people who know how to craft health-specific plans, crunch the numbers on illnesses, and figure out how to deal with hospitals, clinics, and labs. Oh, and claims? Way more frequent than life insurance. They’d need a slick system to keep up with the constant flow—think of it like upgrading from a bicycle to a motorcycle.

But once they get the hang of it, things could get exciting. LIC’s superpower is its reach. We’re talking 14 lakh agents knocking on doors, 85 banks, 309 brokers, and thousands of service centers across India—basically, they’re everywhere. Right now, these folks are pitching life insurance, but imagine them saying, “Hey, while you’re at it, how about a health plan too?” For most of us, insurance is insurance—we just want something that covers us when the hospital bill lands. And with LIC’s trusted name, a lot more people might actually sign up. That’s the big win: more families protected, especially in a country where health insurance still feels like a luxury for many.

Now, LIC could even get creative. Picture a combo deal: one policy that gives you, say, ₹50 lakh if you pass away, plus ₹5 lakh for hospital stays. If they price it right—thanks to their massive scale—it could shake things up. Who wouldn’t want a simple, all-in-one package from a name they already trust?

But not everyone’s cheering. The folks running general insurance companies and standalone health insurers are sweating a bit. Their worry? LIC could play the price game dirty. Here’s how: LIC makes a killing in life insurance—let’s say ₹100 crore a year in profit. They could take a slice of that—maybe ₹20 crore—and use it to slash health insurance prices. While a regular health insurer charges ₹10,000 for a policy, LIC might swoop in at ₹8,000. You’d love that discount, right? But competitors? Not so much. They’d have to drop their prices too, squeezing their profits thin. Some fear it could spark a price war and mess up the whole industry.

Here’s the twist, though: general insurers already mix and match profits from motor, travel, and health policies to keep prices low. It’s not like cross-subsidizing is some evil new trick—it’s been working fine, giving us cheaper options without crashing the market. So maybe LIC doing it wouldn’t be the disaster some predict. It might just mean better deals and a little friendly competition.

There’s another hiccup, though—rules. Back in 2016, life insurers like LIC got kicked out of selling “indemnity” health plans (the ones that pay your actual hospital bills). Instead, they were stuck with “fixed-benefit” plans—like getting ₹10 lakh if you’re diagnosed with cancer, no matter what the bills say. It’s a big shift from covering real costs, and it left health insurance to the general and specialty players. Now, flipping that rule back so soon might feel like a rug-pull for investors who bet on the current setup. Unless LIC gets a composite license, they’d have to play by the same rules as everyone else—still a force with their network, but not quite the game-changer they could be.

So, will LIC transform health insurance in India? It’s a waiting game. They’ve got the muscle, the trust, and the reach to make waves, but it’s all about how they play their cards. For now, we’re just watching—and maybe hoping for a plan that’s easier on the wallet when the doctor’s bill comes calling.

Source: https://finshots.in/archive/will-lic-change-the-health-insurance-market-in-india/