In its FY23 annual report, Star Health (STARHEAL) outlined strong growth opportunities in India’s health insurance in India. The COVID-19 pandemic has heightened awareness of medical expenses, leading to increased walk-in business for health insurance. India’s high prevalence of conditions like diabetes, obesity, and cancer, coupled with a growing elderly population, will result in a continued uptick in hospitalisation cases.
To seize these opportunities, STARHEAL is intensifying its presence in rural India through a dedicated vertical catering to these regions. Additionally, the company is enhancing its bancassurance channel. While individual agents currently account for 82% of the distribution share and remain a cornerstone of STARHEAL’s growth, channels like bancassurance (5%) and digital (9%) are expected to grow more rapidly, potentially increasing their combined share in the coming years. This multi-channel strategy enhances customer accessibility, reinforcing the perception that ‘Star Health is just around the corner.’ In FY23, STARHEAL saw a 14% increase in agent count, reaching 626k. The company expanded its hospital network by adding 2,042 hospitals and securing pre-agreed agreements with 1,996 more. During this fiscal, STARHEAL processed 1.08 million claims through these network hospitals, with 73.3% of them being cashless. In terms of customer service, the company excelled, addressing 95% of cashless claims within 90 minutes and settling 90% of reimbursements within just seven days. Notably, all claims are handled in-house, and the company also conducts assurance visits to hospitals, providing valuable support to customers and offering free supplementary medical opinions.
Valuation: We anticipate STARHEAL to achieve a 19% CAGR in gross premiums from FY23 to FY25. This growth will primarily be driven by a 20% CAGR in retail health premiums and a 10% CAGR in group business premiums. We expect claims ratios to stabilise at approximately 64%, resulting in a combined ratio of around 93%.