Budget proposals for Health sector to benefit health insurers in terms of claim ratios and pricing, says Star Health CFO

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

The Union Budget 2026–27 has accorded utmost importance to the health sector by enhancing budgetary allocations, proposing major initiatives and programmes, and exempting basic customs duty on cancer drugs. How would non-life insurance companies benefit from these measures?

The acknowledgement of market inflation by Finance Minister Nirmala Sitharaman marks a significant step forward. The introduction of the Biopharma SHAKTI initiative, backed by ₹10,000 crore in funding, will contribute to lowering pharmaceutical costs nationwide. Equally beneficial is the customs duty reduction on 17 cancer-related drugs. These developments will directly reduce insurers’ claims expenses and enable more affordable health insurance pricing. Such government efforts ultimately support improved accessibility across the sector.

Star Health and Allied Insurance’s Expenses of Management (EoM) ratio rose 211 basis points year-on-year at 33.95 per cent for the third quarter this fiscal. Why did it increase? What is the outlook for FY26-end?

Our EoM ratio remains comfortably below the regulatory threshold of 35%. Key drivers include the loss of GST input tax credits since September 2022, impacting operational expenditures by approximately ₹65–70 crore this quarter. Additionally, our commission strategy for long-term retail health policies requires upfront payments while spreading premium recognition across years. With Q4 traditionally accounting for 35% of annual business, we anticipate full compliance with IRDAI’s EoM limits by fiscal year-end.

In the third quarter, how did the GST exemption on individual health premium help the company grow its retail health segment? How much did the average ticket size increase?

The GST exemption substantially boosted our retail health growth. New customer acquisitions surged by 60% year-on-year with a 23% volume increase. Overall retail health GWP grew 27% during Q3, with the average policy premium rising approximately 11–12% to ₹22,000 compared to ₹20,000 in the previous fiscal year.

In the post-earnings call, the management said the company’s market share in the retail health segment was 31.3 per cent for the nine months of FY26. What was the year-on-year change? How would the company like to grow this market share further in the next two-three years?

Our market share declined marginally from 32.2% last year, reflecting our strategic focus on profitable growth. We’re intentionally reducing exposure in regions with elevated fraud risks or unsustainable loss ratios—notably certain areas of Delhi and Gujarat. Our underwriting discipline prioritizes long-term sustainability over unchecked expansion.

The company is a market leader in the retail health insurance segment. Where do you see that it will be able to grow the business further going ahead?

Significant opportunities exist in the underpenetrated North-Eastern states and semi-urban/rural markets across Southern and Eastern territories. These regions already contribute half of our business. We’re strengthening distribution networks and product accessibility to capture this growth potential systematically.

Published on February 2, 2026