Daybreak - Can LIC do to health insurance what Jio did to telecom?

Episode Date: May 1, 2025

The Life insurance Corporation of India or LIC is now stepping into a sector where more than 860 million Indians or nearly 60% of the population still has no coverage. The insurer signalled its big move into health insurance in March this year with a major acquisition—49% of Manipal Cigna, a private health insurer, in a deal valued at over ₹3,500 crore.And here’s where things get really interesting.This is LIC we are talking about. It doesn’t need to chase quarterly returns or exist to make shareholders rich. It exists to do things, to fix things and show up when the government needs a nudge—or a battering ram. And in a country where trust, access, and affordability in healthcare are still broken concepts for most, a battering ram could be exactly what’s needed.In this episode, we are look at LIC’s entry into health insurance and how the rest of the sector is bracing itself. Because if LIC gets this right, it won’t just be another player in the market. It could be the market.If you have any thoughts or questions about this episode, send them us as texts or voice notes on Daybreak’s WhatsApp at [phone]. Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

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I told you that one of India's oldest institutions is about to shake up one of its most difficult sectors. Okay, picture this. A massive company with over one million agents spread across the country. We are talking about a brand that is so trusted that our grandparents swore by it. and its financial heft could send whole industries running for their money. I am talking about the Life Insurance Corporation of India or LIC.

The Baymouth is now stepping into a sector where more than 800 million Indians, or actually 60% of our population, has still got no coverage. LIC is striding into the health insurance sector with the confidence of a juggernaut that knows how to bend the market. The insurer signaled this big move into the health insurance market in March this year with a major acquisition. It is reportedly picking up as much as 49% of Manipal Signar, which is a private health insurer in a deal that is valued at over 3,500 crore rupees. And here is where things get really interesting. Because this is not just another company looking to diversify.

We are talking about LIC. It does not need to chase quarterly returns or just exist to make shareholders rich. It exists to do things, to fix things and to show up when the government needs a nudge. Or a battering ram. And in a country where trust, access and affordability in healthcare are still broken concepts for most people, a battering ram could be exactly what is needed. So today, we are going to look at LIC's entry into health insurance and how the rest of the sector is bracing itself. Because if LIC gets this right, it won't just be another player in the market.

It could be the market. Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nickda Sharma, and I don't chase the news cycle. Instead, every day of the week, my colleague Rahil Filippos and I will come to you with one business story that is worth understanding and worth your time. Today is Friday, the 2nd of May. In the last financial year alone, LIC made 8 lakh crore rupees in revenue. Do you know how much that is?

$96 billion. And it still had a surplus of over 90,600 crore rupees, which is roughly $11 billion. I mean, that kind of cash doesn't just buy influence. It buys options. it lets you offer insurance at prices that others cannot match. Or they just won't. And that is why the comparison to geo hits home.

When Geo entered the telecom space back in 2016, it gave away 4G data for free. And that sent the old business models reeling from the blow, kill the margins, and basically reset consumer expectations. LIC has the same playbook available, just in a different sector. Because health insurance in India is, as you know, complicated. It is expensive, it is limited, and it hasn't evolved fast enough. Even now, like I said earlier, more than half of our population is uninsured. But LIC, by virtue of being government-backed

and overflowing with capital, could change that, not by magic, but by pricing. Individual health plans today range from 5,000 rupees to 20,000 rupees annually. Family floaters go up to 50,000 rupees. And LIC has the money and arguably the mission to kind of undercut those rates, especially if it is willing to subsidize premiums for the sake of scale. And scale? Well, we all know LIC no scale. It commands over 60% of India's life insurance market.

Over half of the nearly 3 million life insurance agents in our country work for LIC. And they're not just selling policies. They are embedded into our social lives. They're at our weddings. They're at our family functions. They are nudging you towards a plan for tax benefits. I mean, we all know this, right? This army of agents is LIC's secret weapon.

And many of them are already in the health game. Just not for LIC. because here's the twist. While LIC agents cannot sell life insurance from other competitors, there is no such restriction on health or general insurance. So they have diversified. So they are already selling policies from Star Health, Neva Bupa, Care and even Manipal Signar, the very company that LIC wants to invest in.

So in a way, LIC is not just entering a new market. It is reclaiming one that it already has a full-efficient. in through its own agents. But health insurance isn't life insurance, it is a whole different beast. With life insurance, you sell a policy once and then maybe the customer checks in 15 years later. It is passive. Health insurance, it is active. Claims come more frequently, customers call you when something is wrong, premiums change every year, it is messy and it is high maintenance. And agents, they need support, they need relationship managers, they need tech platforms, they need help with claim processing. Private insurers offer all of this. LIC so far

does not. So if LIC wants all its agents to sell health plans with the same zeal, it needs to step up its game and it needs to do it fast. And it might get help from policy changes too. A new insurance amendment bill could actually soon allow LIC to operate under a composite license, which means it could sell all kinds of insurances under one roof. Until then, buying into an existing health insurer like Manipal Signer is its best way in. But even that does not really solve everything. Because cross-selling has created some weird incentives. Agents make more money switching you from one insurer to another than by renewing your existing plan. There is no real loyalty and it is all about commissions. So to win, LIC will need more than just brand trust. It will need to keep

its agents and its customers interested. And guess what could help here? Premiums. And it will also need to keep things simple. LIC's last health product, which was called Jiva Narogia, failed partly because it was too complicated to explain. Even loyal agents gave up on it. This time, LIC seems ready and hospitals, they seem to be just watching. LIC brings with it two things that hospitals love, trust and the potential for lots and lots of new insured patients, particularly from India's underserved middle, which is the crores of people who are too rich for government schemes, but too poor to afford 30,000 rupees private health plans. So if LIC can crack this segment, it could change the way hospitals plan their finances.

Because unlike Ayushman-Bharat, which hospitals complained pays too little and too late, LIC could offer a steady, predictable cash flow. And that is a big deal. Because when hospitals get paid on time, they can plan, they can invest and they can upgrade. But again, there is a catchier. You see, cheap premiums are great for patients. But hospitals also need fair risk. reimbursement rates. If LIC pressures prices too much, small and mid-sized hospitals might struggle

to stay afloat. They might start cutting corners and start using cheaper consumables and just downgrade care. And that is not the kind of trade-off that any of us wants, right? But hey, there is hope. A new system is in the works to classify hospitals by their capabilities, not just by location. And this could help insurers price more fairly and give hospitals incentive to improve, not just survive. Meanwhile, digital infrastructure is catching up to. The National Health Claims Exchange promises to streamline claims

between hospitals and insurers. And that is critical if LIC wants to operate at scale. And here's the kicker. LIC is thinking in centuries, literally. It is reportedly asking the RBI for access to 100-year bonds. That is how it plans to match its massive liabilities with equally strong long-term assets. So you see, this is not just a short-term disruption. This is a long game.

And LIC does not even need to win to make an impact. Just by showing up, it is kind of going to reset the market. Its threat is enough to make rivals rethink their prices, improve service and scramble for customer loyalty. It does not need to be geo. It just needs to feel like geo. And that is all for today, dear listener. Thank you for tuning in.

And if you think today's episode is insightful, please do share it with somebody who still is confused about their health insurance options. And of course, if you have any thoughts on LIC entering the health insurance market, then do write to us or send us a voice note on our WhatsApp number, which is 89711-08379.

I'll repeat that again, 89711-08379. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters and podcast extras. To subscribe, head to the Ken.com, and click on the red subscribe button on top of the Ken website.

Today's episode was hosted by Sniktha Sharma and edited by Rajiv Siyah.