Detailed Narrative
Portfolio Recalibration Drives Margin Expansion
Star Health has successfully pivoted its business mix, with the retail segment now accounting for 95% of the total book, up from 91% last year. The company has fully exited unprofitable group employer-employee portfolios and repriced the high-claims Banca Group book. This recalibration resulted in a 190 basis point decrease in the net incurred claim ratio for Q2 FY26 compared to the previous quarter, standing at 71.8%.
GST Reform: A Double-Edged Sword
The government's exemption of GST on retail health indemnity policies is viewed as a major demand catalyst, with fresh business in October already showing nearly 50% growth. However, the loss of Input Tax Credit (ITC) creates a cost pressure. Management is mitigating this by making intermediary commissions inclusive of GST starting October 1, 2025, which they estimate will offset the ITC loss without impacting the P&L.
Digital and Agency Channel Dynamics
The agency vertical remains the backbone of the business, contributing 83% of total GWP and growing at 16% YoY with a base of 8 lakh agents. Simultaneously, the digital channel has emerged as the fastest-growing vertical, with 47% fresh premium growth and a 20% contribution to overall fresh business. The company's proprietary mobile app has reached 12 million downloads, now generating 9% of retail new policies (NOPs).
Underwriting Discipline and Fraud Detection
Management highlighted the role of in-house AI/ML technology platforms in improving claim settlement ratios to 90% while simultaneously reducing fraud. These proprietary fraud detection models delivered a 35% growth in savings over the last year. Additionally, the company has implemented price corrections in 65% of its retail book over the past year to combat medical inflation.
Investment Performance and MTM Impact
The investment book yielded 8.3% in H1 FY26, supported by an 18% allocation to equity, ETFs, REITs, and InvITs. However, Q2 FY26 PAT was restricted to ₹79 crore due to a significant MTM loss of ₹122 crore (pre-tax). Management remains committed to a long-term asset management philosophy, viewing these quarterly fluctuations as non-core to the underwriting business.