The healthcare scheme announced recently by the government as part of the 2018 budget has been defined as a “game-changer” for the health industry in India. It is expected to spark a substantial growth for insurance providers, according to S&P Global Ratings.

These changes are expected to come into full effect once the NHPS scheme is implemented. A statement from S&P Global Ratings said that this move reveals the government’s intention to expand the government’s protection umbrella and could have could have far-reaching implications for the domestic insurance sector

"We believe the proposal has the potential to be a game changer for the health industry based on its sheer coverage size and scope," S&P said. 

"An effectively executed National Health Protection Scheme (NHPS) will bring coverage to 40 per cent of the population and generate substantial growth in health insurers' premiums and increased cross-selling opportunities," it added. 

This scheme will be the largest healthcare programme by a government. Upon its announcement as part of the Union Budget 2018-19, it was revealed that the scheme will cover Rs. 5 lakh for over 10 crore vulnerable and poor families, which amounts to 40 percent of the population.

"We expect insurers to introduce a range of new products with healthier coverage to capitalise on increased tax incentives amid rising medical inflation," it added. 

The government has also proposed a merger of the three public-sector insurance companies. This is a measure that will reduce competition and help in improving underwriting discipline in the market.

United India Insurance, Oriental Insurance and National Insurance, the three public-sector insurance companies make up for 30 percent of the total market share of non-life insurance markets in India, with a premium book of more than Rs 40,000 crore. 

"A merger of three big public insurers in India will improve the sector's overall profitability by reducing competition. In our view, less competition will facilitate improved underwriting discipline, enhanced risk retention, and better managed solvency levels in the Indian insurance market," S&P Global Ratings credit analyst Trupti Kulkarni said.