Life Insurance Corporation of India (LIC), the country's largest life insurer, plans to join the health insurance market by acquiring a stake in a health insurance firm. According to LIC CEO Siddhartha Mohanty, the decision is in the final stages of negotiation, with an official announcement likely by March 31, 2025.

LIC's entry into health insurance is viewed as a natural step towards expanding its presence in the insurance market. Mohanty indicated at an event that "entering the health insurance sector is a logical step for LIC, and the discussion regarding stake acquisition is in the final phase."

While the identity of the target firm has not been published, LIC intends to acquire a minority ownership of less than 51%, guaranteeing that it does not gain complete control. The exact percentage of interest will be established by LIC's board after careful consideration.

Given the expanding need for health insurance in India, LIC's foray into this industry is considered a strategic diversification that is consistent with the company's long-term objective. With healthcare expenses rising and public awareness of health insurance growing following the pandemic, LIC intends to use its broad distribution network and customer base to sell health insurance products more effectively.

This development comes amid increased discussions about issuing insurers composite licences, which would allow them to offer both life and health insurance under one cover. Although the central government made no public statements about composite licenses in the Union Budget, industry insiders think that such a regulatory move has the potential to transform India's insurance sector.

Rumours in the media suggest that LIC is considering purchasing a share in Manipal Cigna Health Insurance, but there has been no official confirmation. Manipal Cigna, a well-known participant in the health insurance industry, provides a diverse choice of comprehensive health plans, making it a suitable strategic fit for LIC's entry into this sector.

Mohanty emphasised that LIC will not acquire more than a 51% interest rate to avoid gaining majority control. The LIC board will make the final decision on the acquisition proportion after thorough consideration. The acquisition is intended to follow regulatory rules and guarantee a smooth transition into the health insurance industry.

The decision by LIC to enter the health insurance market comes at a vital time for India's health insurance business, which is rapidly expanding. With rising healthcare costs and more knowledge, the need for comprehensive health insurance has reached an all-time high. LIC's entry can drastically disrupt the market by providing low and accessible health insurance coverage, utilising its large customer base and decades of trust.

However, LIC must manage the difficulties of the health insurance sector, which works under fundamentally different principles than life insurance. Ensuring seamless integration and operational efficiency is critical to LIC's success in this new arena.