Composite insurance policy: India’s insurance industry has significant headroom for growth, especially in health and general insurance. The Life Insurance Corporation of India, the country’s dominant life insurer, is preparing for a potential strategic overhaul. While LIC already has a presence in general insurance, it is exploring the possibility of becoming a composite insurer — offering life, general, and health insurance under a single licence. The trigger is the anticipated passage of the Insurance Laws (Amendment) Bill which could enable composite licensing and reshape the competitive environment.
A composite licence allows one insurer to sell multiple types of coverage — such as life, motor, property, and health — under a unified regulatory framework. This reduces compliance costs, enables economies of scale, and creates opportunities for cross-subsidisation. Customers benefit from bundled products that offer convenience, lower premiums, and wider coverage—such as a combined ₹50 lakh life policy with ₹5 lakh health cover.
READ | PM-KUSUM 2.0 promises to transform rural economy
The Insurance Regulatory and Development Authority of India (IRDAI) has been working on amendments to allow this model, but as of August 2025, no company, including LIC, has secured a composite licence. LIC’s MD and CEO Subrata Panda has said the company is watching the health insurance segment closely, though it has not finalised any acquisitions pending regulatory clarity.
Strategic fit with national priorities
The decision to diversify will rest with LIC’s board and shareholders. They must weigh the benefits of expanding into new segments against the risk of diluting focus on life insurance. The government’s broader goal — raising insurance penetration — adds urgency. Only 60% of Indians have health coverage, much of it through state-sponsored schemes; pure private health insurance covers less than 40% of the population, compared with a global average of 70%.
With over 1.4 million agents, 85 banking partners, 309 brokers, and thousands of service centres, LIC’s distribution reach is unmatched. If the composite licence is approved, this network could instantly become a sales force for health and general insurance, giving LIC a unique edge in penetrating underserved markets. Post-pandemic, demand for indemnity-based health policies — covering actual hospitalisation costs—has risen sharply.
Financial muscle and product innovation
LIC’s financial position supports an ambitious expansion. In Q1 FY26, it reported a standalone net profit of ₹10,987 crore on total premium income of ₹1,19,200 crore. Analysts believe a composite licence could enable LIC to offer competitively priced “combi products” by cross-subsidising health insurance premiums with profits from life insurance.
Such a strategy could intensify competition, pressuring standalone health insurers like Star Health and Niva Bupa, which have expressed concerns about unfair pricing and market disruption. Similar models in Singapore and the Philippines show that composite insurers can thrive without undermining specialised players, provided regulatory safeguards are strong.
Composite insurance by LIC: Challenges in execution
Health insurance is operationally complex. It requires deep actuarial expertise, robust claims management, and an extensive hospital network — capabilities LIC does not yet possess at scale. Entering this space will demand heavy investment in systems, processes, and talent. The regulatory environment also remains fluid. The 2016 IRDAI rule that restricted life insurers to fixed-benefit health products marked a major shift; reversing it could unsettle investor expectations.
Execution risks are real. The market will judge LIC on its ability to integrate new lines without compromising efficiency or service quality in its core life business.
Market response and deal options
Investor sentiment is cautiously positive. While LIC’s share price has not moved significantly, the prospect of diversified revenue streams is viewed favourably. Still, analysts warn that operational discipline will determine whether expansion boosts long-term value.
Parallel to awaiting Parliament’s decision, LIC is exploring acquisitions—most notably a potential ₹3,500–4,000 crore stake in ManipalCigna Health Insurance. Whether through a composite licence or a stake in an existing health insurer, LIC’s entry into the segment could redefine India’s insurance market.
The coming months will be decisive. A composite licence would allow LIC to leverage its unmatched distribution network, financial heft, and brand trust to capture a much larger share of an underpenetrated market. But success will depend on how quickly it builds the capabilities needed for a complex and competitive health insurance business. If executed well, this shift could mark a new chapter in LIC’s long history—one that positions it as not just India’s largest life insurer, but the country’s most comprehensive insurance provider.