Last year, in September, Bengaluru-based Manipal Group entered the insurance business by picking up a 16.04% stake in Cigna TTK Health Insurance for an undisclosed amount. Sensing potential in the country’s health insurance sector Manipal Group increased its stake in the joint venture (JV) to 51% buying TTK Group’s entire shareholding in the company which is pending regulatory approval. Global insurance company Cigna will continue to hold 49% stake in the newly-named JV: ManipalCigna Health Insurance. In an interview with Fortune India Ranjan Pai, chairman of Manipal Education and Medical Group (MEMG), spoke about the group’s foray into the health insurance business, investments, opportunities, and plans ahead. Edited excerpts:

What made you venture into the health insurance space?

We tried working with Cigna [Corporation] when they first entered India. It is our long-term play focused on our core business. Today India has a mature insurance market. People are now buying insurance products. And I feel this change started happening two-three years back. That’s the time we seriously started exploring the space and when this opportunity arrived we grabbed it.  So far, it has worked out well. TTK was anyways looking at getting out of the business so we found it easier. And both Cigna [Corporation] and us knew each other so it was much easier transaction to conclude.

How is the joint venture shaping up?

There was a five-year lock in period for TTK, which just got over. So we are in the process….we have made the necessary [regulatory] application, so it’s a matter of time before we get that. But we have already put in money into the company. There’s been management changes, the board composition has changed. The name change of the company has been done which I think is a major milestone. It’s a board managed company and we have a strong board. Luis Miranda [former chairman, IDFC Private Equity] is the chairman of the board.

How much you are looking to invest in the initial phase of the business?

In the initial phase, we are looking at ₹400 to ₹500 crore over a period of five years.

At present, how big is the insurance business for Manipal Group?

It is still a small business… about 10%-15% of the overall group. But it is a very fast growing industry. The industry growth rate is about 26%.

Manipal is one of the few hospital chains in India which has forayed into health insurance in the recent past while many large hospital chains have either exited or looking to exit the space. Why did you take this call?

From our perspective we are not looking at it as a standalone business. The [insurance] industry is really at a tipping point where I think the next 20 years are going to be a very exciting time for insurance, especially with government’s health insurance scheme, Ayushman Bharat [National Health Protection Scheme] coming in, I think there’s a lot more awareness of insurance among people.

Medical inflation is going up. From person to person it depends on how much you can afford. What is expensive for you maybe cheap or affordable for others. But everybody has to have some sort of basic insurance cover. In the past ₹1 lakh coverage is more than enough but today ₹1 lakh health cover is not enough. ₹6 lakh to ₹10 lakh coverage is a minimum requirement today. So there are opportunities both to increase the size of coverage as well as go deeper into the sector.

How do you see home healthcare fuelling growth in the health insurance space

Home healthcare can really reduce hospitalisation costs. So I think it is a very good initiative. As we also understand the payer side due to our exposure in the hospital space we will work with Cigna to see how do we structure newer products such as outpatient insurance, pharmacy benefits and home healthcare.

There is an opportunity that you see in the insurance business and that is why this collaboration has happened. If you could give us a sense of why you decided to enter into it now?

From Manipal’s [Group] evolution the timing was right. If it was not for Cigna, we would’ve looked at another insurance company. We’ve been scouting around for sometime but nothing good worked for us. Then came Cigna. I felt it was a right fit for us. We are new to insurance but we understand healthcare and the India market. It was important that we have a stable, strong partner who is committed to India for the long run.

Five years from now, how will this business look like?

I think in five years time it has the potential to become 30%-35% of the overall group size. The company will continue to grow at a healthy rate of 30% to 40% CAGR for the next five years.

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