Star Health CFO Nilesh Kambli says insurance distribution rule changes not to cause much disruption

Insurance regulator IRDAI’s proposed changes in insurance distribution norms is positive for the industry as a whole, especially for the proprietary channels, and Star Health and Allied Insurance does not see much of a disruption in it, says Chief Financial Officer Nilesh Kambli. In an interview with businessline, Kambli says there is an indication that many group health insurance businesses would shift to retail on the bancassurance channel if the proposed changes to distribution economics take effect in their current form.

Excerpts: https://www.thehindubusinessline.com/topic/irda/ https://www.thehindubusinessline.com/stocks/star-health-allied-insurance-company-ltd/ Star Health and Allied Insurance posted around 233 per cent year-on-year growth in its net profit to ₹265 crore in Q2 this fiscal. What were the factors that contributed to it? First, there was an improvement in the core operating result, which is the underwriting result, that improved from negative ₹40 crore in Q2 FY26 to positive ₹99 crore in Q2 FY27.

It was a function of both improvement in the Loss Ratio and the Expense Ratio. The loss ratio improved as we have been taking many business level decisions in terms of regular price increase. We have been consistently taking price increases in higher single-digit numbers.

That has helped us a lot in terms of having the yield on the portfolio. We have considered strict underwriting decisions. In terms of new to insurance business, we have reduced our focus on portability, where the loss ratio is higher.

Secondly, we are focusing on business from preferred geographies. We see that the tier 2 and 3 cities operate at a decent loss ratio compared to other cities or metros because of the higher cost of treatment. If I come to the clearing side, there is a lot of clearing efficiency that we have seen.

One is the improved use of tech and AI for fraud, waste, and abuse. We certainly have a better solution to detect some of the hard and soft frauds, and that has helped us in reducing the claims cost. The Combined Ratio improved to 98 per cent in the second quarter this fiscal from 100.9 per cent in the same quarter last fiscal.

What are the combined ratio and loss ratio that you are looking at for this fiscal? We are not giving any guidance, but what we see is the efforts that we have taken, and we have seen a consistent improvement in our loss ratio for the last five quarters now. We believe there should be a natural improvement going forward as well.

The ultimate objective is to ensure that we earn mid-teens to high-teens ROE in the coming two to three years. What percentage of the total premium is currently coming from the retail health insurance, and what percentage is from the group health insurance? And how is the mix expected to change going forward for the company?

Retail is now around 96 per cent of the business. Group is around 4 per cent, which is a mix of bancassurance channel group business and the employer-employee group business. We will see now that with the proposed distribution regulations coming in, how the retail-group mix pan out going forward.

We will have to see with the bancassurance channel how much growth will be available. There is an indication that many of these group businesses will shift to retail on the bancassurance side. The commission reduction is very drastic in that segment.

On the group employer-employee side, we are focused on agency business, which is profitable. We will have to see, but largely we should be in this range for the next one or two years at least. What do you think of the proposed changes in insurance distribution norms?

We believe that it’s positive for the industry as a whole, and especially for proprietary channels, which is our agency channel, we don’t see much of a disruption. With the productivity improvement with more consumer awareness which is getting created, I think they should be able to make up for their lost income with higher volumes. We see the industry will continue to grow.

The objective of the regulator is to ensure affordability of the products going forward, which should get achieved with this distribution navigation. Are you talking to your bancassurance partners and brokers on the proposed changes in distribution norms? We are in discussion with them.

The initial stage is to give feedback to the regulator in terms of what are all the changes that one wants. So, it’s at this stage. The final regulations are still awaited.

There are some initial discussions, but nothing major. Everyone is waiting for the final draft regulations to come. Star Health and Allied Insurance posted around 233 per cent year-on-year growth in its net profit to ₹265 crore in Q2 this fiscal.

What were the factors that contributed to it? First, there was an improvement in the core operating result, which is the underwriting result, that improved from negative ₹40 crore in Q2 FY26 to positive ₹99 crore in Q2 FY27. It was a function of both improvement in the Loss Ratio and the Expense Ratio.

The loss ratio improved as we have been taking many business level decisions in terms of regular price increase. We have been consistently taking price increases in higher single-digit numbers. That has helped us a lot in terms of having the yield on the portfolio.

We have considered strict underwriting decisions. In terms of new to insurance business, we have reduced our focus on portability, where the loss ratio is higher. Secondly, we are focusing on business from preferred geographies.

We see that the tier 2 and 3 cities operate at a decent loss ratio compared to other cities or metros because of the higher cost of treatment. If I come to the clearing side, there is a lot of clearing efficiency that we have seen. One is the improved use of tech and AI for fraud, waste, and abuse.

We certainly have a better solution to detect some of the hard and soft frauds, and that has helped us in reducing the claims cost. The Combined Ratio improved to 98 per cent in the second quarter this fiscal from 100.9 per cent in the same quarter last fiscal. What are the combined ratio and loss ratio that you are looking at for this fiscal?

We are not giving any guidance, but what we see is the efforts that we have taken, and we have seen a consistent improvement in our loss ratio for the last five quarters now. We believe there should be a natural improvement going forward as well. The ultimate objective is to ensure that we earn mid-teens to high-teens ROE in the coming two to three years.

What percentage of the total premium is currently coming from the retail health insurance, and what percentage is from the group health insurance? And how is the mix expected to change going forward for the company? Retail is now around 96 per cent of the business.

Group is around 4 per cent, which is a mix of bancassurance channel group business and the employer-employee group business. We will see now that with the proposed distribution regulations coming in, how the retail-group mix pan out going forward. We will have to see with the bancassurance channel how much growth will be available.

There is an indication that many of these group businesses will shift to retail on the bancassurance side. The commission reduction is very drastic in that segment. On the group employer-employee side, we are focused on agency business, which is profitable.

We will have to see, but largely we should be in this range for the next one or two years at least. What do you think of the proposed changes in insurance distribution norms? We believe that it’s positive for the industry as a whole, and especially for proprietary channels, which is our agency channel, we don’t see much of a disruption.

With the productivity improvement with more consumer awareness which is getting created, I think they should be able to make up for their lost income with higher volumes. We see the industry will continue to grow. The objective of the regulator is to ensure affordability of the products going forward, which should get achieved with this distribution navigation.

Are you talking to your bancassurance partners and brokers on the proposed changes in distribution norms? We are in discussion with them. The initial stage is to give feedback to the regulator in terms of what are all the changes that one wants.

So, it’s at this stage. The final regulations are still awaited. There are some initial discussions, but nothing major.

Everyone is waiting for the final draft regulations to come.