Niva Bupa Health Insurance Company Ltd (NSE: NIVABUPA) Q4 2025 Earnings Call dated May. 07, 2025
Corporate Participants:
Krishnan Ramachandran — Managing Director and Chief Executive Officer
Vishwanath Mahendra — Whole-time Director and Chief Financial Officer
Bhabatosh Mishra — Director, Claims, Underwriting and Product
Vikas Jain — Executive Vice President and Chief Investment Officer
Ankur Kharbanda — Whole-time Director and Chief Distribution Officer
Analysts:
Rushad Kapadia — Analyst
Supratim Datta — Analyst
Prayesh Jain — Analyst
Ananga Rana — Analyst
Sanketh Godha — Analyst
Shreya Shivani — Analyst
Akshay Jogani — Analyst
Gaurav Nigam — Analyst
Bhuvnesh Garg — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Q4 Results of Niva Bupa Health Insurance Company Limited hosted by ICICI securities.
This conference may contain forward-looking statements about the company which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Rushad Kapadia from ICICI Securities. Thank you. And over to you, sir.
Rushad Kapadia — Analyst
Thank you. Good evening, ladies and gentlemen and welcome to the Q4 FY ’25 results conference call for Niva Bupa Health Insurance. We have with us from the management, Mr. Krishnan Ramachandran, Managing Director and CEO; Mr. Vishwanath Mahendra, Chief Financial Officer; Mr. Ankur Kharbanda, Chief Distribution Officer; Mr. Bhabatosh Mishra, Director Claims, Underwriting and Product; Mr. Dhiresh Rustogi, Chief Technology Officer; and Mr. Vikas Jain, Chief Investment Officer.
So thank you. And over to you, sirs.
Krishnan Ramachandran — Managing Director and Chief Executive Officer
Thank you, Rushad. Good evening and thank you to every one of you who is participating in this call at a late hour. It is my privilege to present the full year financial results of Niva Bupa. The first time up to be listed as an organization in November 2024. I’ll walk you through some key highlights of FY ’25 and I’ll request my colleagues to chip in as we move along.
On a full year basis we closed last year — and as much as possible I’ll refer to numbers on a like-to-like basis. Because as you are all aware there was a significant accounting change affected by the insurance regulator October 1 last year. So I will, for ease of comparison I will refer to some a bunch of numbers on a like-to-like basis. So we closed last year in terms of GWP at INR7,406 crores, a growth rate of 32% without the 1/n accounting change. We closed the year on an IFRS profit after tax of INR203.3 crores on a full financial year basis. We continue to maintain consistently high claim settlement ratio. 92.4% claim settled out of every 100 claims that we get. And we improved our weighted average NPS to 55 for the full financial year, up from 50-odd in FY ’24.
Just to walk you through progress on our strategic pillars. Pillar one is being the health partner of choice for customers. Pillar two is building out the multi-channel and diversified distribution mix. Pillar three is a business model that’s underpinned by technology and analytics, disciplined underwriting or keeping discipline around underwriting and claims and a big focus on talent management. On a full year basis in terms of product mix, we closed the year with 65.5% retail and the balance split between group and PA and travel. Our group mix increased on the full book primarily because we had the privilege of writing two large corporate accounts that valued our proposition specifically around the wellness ecosystem and our ability to deliver on a total cost of ownership platform centered around not just insurance but also managing the health of employees at very acceptable economics. We also grew our retail market share from 9.1% in FY ’24 to 9.4% on a full year basis.
During the last quarter we launched a new product called Rise. We are very excited about with this product because it targets what in our assessment is the largest unserved population in health insurance in India which is the Missing Middle as NITI Aayog refers to it; middle class, lower middle class Indians. So we launched this product in February and we believe this opens up a whole new and large customer segment for us as a company. We continue to make solid progress on our health and wellness ecosystem, borrowing off Bupa’s global healthcare strategy and all of this is delivered through our customer app. We have more than 11 million downloads of our app as of last financial year and our monthly active users on the app is in excess of 0.5 million.
As I already mentioned, our episodal NPS moved to 55 from 50 and specifically, we improved on what is the moment of truth in the health insurance business which is the claims NPS. Specifically at the time of discharge we moved that number to 67 for the full financial year, up from 63. We continue to expand on our distribution. During the last quarter we added 8,000 agents and between banks and brokers we added 30 new distribution partners during the quarter. Again we continue to make progress on analytics and technology and one KPI I’ll highlight is our auto adjudication rate on claims moved up to 28.5% on a full year basis.
We also continue to execute on our Preferred Provider Network strategy which delivers in our opinion the right combination of quality and value for customers. Our PPN network is now present in 40 cities across India and covers close to 600 hospitals. The average claim size which is a good proxy for medical inflation that we experienced in our portfolio grew by 5%. And broadly, the CAGR on this has been about 6.5%, 7% on our portfolio. So last year we experienced unit cost inflation as measured by ACS of 5%. And before I hand over to my colleague, I think one aspect that we are especially proud of and we measure ourselves is how well we do on talent. And we did get recertified as a Great Place to Work. And we rank once more in the Top 25 Places to Work in Banking and Financial Services.
I’m now going to request Vishwanath, our CFO to talk about our financials.
Vishwanath Mahendra — Whole-time Director and Chief Financial Officer
Thank you, sir. Good evening, everyone. So like Mr. Krishnan talked about the growth rate on like-to-like basis in terms of DWP it’s 32%. On 1/n basis it is 21% in FY ’25 over last financial year. Net earned premium grew by 28% to INR4,894 crore. The PAT under IFRS grew around 91% from INR106 crore in FY ’24 to INR203 crore in FY ’25. The profit under iGAAP has also registered significant growth from a profit of INR82 crore in last financial year to INR214 crore in current financial year, resulting in around 161% improvement.
There is increase in combined ratio for FY ’25 by around 245 basis points to 101.2% from 98.8% in FY ’24. Due to 1/n impact, the increase in combined operating ratio is majorly driven by loss ratio which is 59.1% in last financial year and 61.2% in current financial year. Without 1/n impact, the combined ratio for FY ’25 is 96.1% with an improvement of around 270 basis points from FY ’24 of which 80 bps is coming from improvement in loss ratio and 190 bps from improvement in expense ratio on like-to-like basis. Investment yield in last financial year is 7.4% with AUM of INR8,175 crore. Solvency ratio is at healthy level of 3.03 times against regulatory minimum of 1.50 times as on 31st March 2025.
So this was broadly an overview of last financial year. Happy to take questions.
Questions and Answers:
Operator
Thank you, sir. Ladies and gentlemen, we will now begin with the question-and-answer session. [Operator Instructions] The first question comes from the line of Supratim Datta from Ambit Capital. Please go ahead.
Supratim Datta
Thanks for the opportunity. Just wanted to understand if you could split the loss ratio between retail and group and within group, your affinity products and group employer-employee, how would those have tracked in FY ’25 versus FY ’24 if you could give us some color on that, that would be very helpful? And the second part is I understand in the commentary you have mentioned that you have increased the share of employer- employee at a favorable economics. Typically, this business has shown time and again that loss ratios can be very volatile. So, what are you doing different that will allow you to arrest this volatility in this product, if you could help me understand that, that would be again very helpful?
And lastly on the claim inflation, the claim inflation appears to have reduced versus FY ’24, it was around 7.4%, it has now come down to around 5%. Now, this again seems to be in contradiction with what we hear in the industry that claim inflation continues to go up. So again, if you could help us understand what you are doing differently which is allowing you to arrest this claim inflation, that would be very helpful? And if the claim inflation is coming down, does that mean that the price hikes that we have been taking around 10%, does that need to be revised downwards as well? Those are my three questions. Thank you.
Vishwanath Mahendra
Thank you, Supratim. So in terms of loss ratio, I will talk about IFRS loss ratios, which are on 1/365 and since these are IFRS, there’s some loading for claims handling expenses, which is to the tune of 3 percentage point, so just to give you context. So last year overall loss ratio on 1/365 IFRS was around 63% which is 63.8% to be precise in FY ’25. So FY ’24, 63% moving to 63.8%. So in terms of retail and group, retail was around 65% last financial year, which is 66% in this financial year. So there is a 100 basis points increase in retail loss ratio. Group, we don’t bifurcate in employer-employee, non-employer-employee. So in IFRS we look at group on a combined basis, which was 57.7% last year which has increased to 58.2%. So that’s the group loss ratio. In terms of medical inflation, 5% inflation, this is more or less in line with what we have been experiencing between 5% to 6%, 6.5% medical inflation year-on-year.
Doc you want to talk about anything on medical inflation we are doing differently.
Bhabatosh Mishra
Sure. Thank you for your question. At Niva Bupa entire provider management and tariff management strategy is deeply driven by insights coming from data analytics. Instead of a generic approach of volume-based and other instrument-based discount, we have a targeted discussion with providers. In terms of providers strategy as you would have seen now we are present in 40 cities with a provider network which is preferred to us which is of reasonably good quality treatment at affordable cost to our customers generating value. So that is the strategy we have taken forward and scaling up, more than nearly 600 hospitals right now and gradually customers are happy to move into there because it helps them.
We also deploy specific negotiation tactics based on data as I mentioned which is about packaging of procedures and discounting on specific diagnosis and procedures, which have a disproportionately larger impact on our book and positive impact. And last but not the least, we do deploy as you may possibly be aware that billing review, case management, these are measures we deploy so that protocol basis consultation with treating doctors and protocol applications ensuring right treatment and billing review to ensure that the billing format and practices of hospitals are as per the SoC agreed with them. These are some of the measures which help us achieve better control on medical inflation trends.
Krishnan Ramachandran
But more broadly Supratim, I’ll just add to what Vish and Doc have said. Ultimately the focus of all of this is to manage to a target claims ratio and we deploy broadly five levers to do that. One is the risk selection method that we have and we would have spoken in the past as well about our lifetime value approach to selecting risk. We believe that this is the most critical determinant to underlying portfolio quality and therefore claims ratio.
Second is the risk assessment framework which is making sure that they are pricing risk appropriately. So somebody who is diabetic, we need to make sure that the risk is priced for average cost which is over lifetime 1.5 times to 2 times more than the averagely healthy individual. Claims management, Dr. Bhabatosh referred to. The other one is a good rhythm of continuously cross-selling and upgrading to our customers using underpinned by our next best offer analytic models. And as we’ve updated in the past, we do execute annual premium revisions to negate overall medical trends that we experience in our portfolio.
To your question on employer groups, again the idea is to yes, you’re right. This is a market where pricing levels fluctuate in the industry, but just making sure that they’re disciplined around what price points they’re able to write this business at and also making sure that we have a healthy mix of small and medium enterprises. That’s a very focused effort within the company to make sure that overall as a portfolio we run this in a way that delivers economic value. Somewhat long answer, but that’s broadly the sense of what we do to address your question.
Supratim Datta
Got it, got it. Thank you.
Operator
[Operator Instructions] The next question comes from the line of Prayesh Jain from Motilal Oswal Financial Services Limited. Please go ahead.
Prayesh Jain
Hi. First of all, good set of numbers. Congratulations for that. First question is on what would be your gross level expense of management in FY ’25 and how — give us a glide path and achieving the expense of management guide, the regulation, how would you meet that? That would be point one. Question two would be on your network hospitals. That doesn’t seem to be growing in that sense. So what are the thoughts there? And just extending that hospital’s question, what is the status with respect to negotiations with hospitals coming down to a common agreed rate. And last question, what will be your AUM mix between debt and equity. Thanks.
Vishwanath Mahendra
Sure. So I’ll address expense of management question, Prayesh. So expense of management ratio for FY ’25 is 37.4%. There’s improvement of 190 basis point over last financial year where it was 39.3%. And incidentally, the same improvement we have seen in FY ’24 over FY ’23 also. FY ’23, 41.2%, improving to 39.3% in FY ’24 and 37.4% in FY ’25. And if you just see FY ’25, let’s say what is the allowable expense ratio. So it is 35.5%, considering 35% [Phonetic] and some allowances on insure-tech, etc. So we are again around 190 basis points away. So we are very confident that we’ll be able to achieve this in current financial year looking at the trajectory.
Doc, you want to…
Bhabatosh Mishra
You’re right, the network hospital strength has not grown substantially and that’s a conscious decision. While what you see there is a net of addition deletions, 80% plus of claims come from a limited number of few hundred hospitals. Thus having a network of 10,500, close to that also enables servicing our customers across the length and breadth of this country. And we follow a rigor of reviewing hospital from quality, cost and other point of view and other practices point of view periodically. And thus, while we add quality hospitals based on where we are getting reimbursement claims from, we also consciously de-panel some hospitals based on the practices as I spoke about earlier on cost, quality and some of the other practices around customer service, etc.
Krishnan Ramachandran
And so on your question, Prayesh on where are we on the common empanelment initiative of the industry. The initiative, as you know, is being led by the General Insurance Council. It is well underway. The idea is to, you know, teams have been formed, the entire country has been broken up into a number of geographies. Teams have been formed and allocated specific hospitals. So discussions are underway at these hospitals to get them to sign up with the council as the representative authority to build out this common network. It’s work in progress. As you can expect in an initiative like this, there’s obviously pushback because what we’re asking for is whoever we tie up with offers the industry the lowest rate that they have with any provider. So there is pushback but there are also early positive signs of willingness to accept and move forward. So all I can say is very much underway and a solid work in progress.
Vikas Jain
Prayesh, to your question on the investment book, all of our investment book is debt as of now. We have a very negligible portion that we’ve invested in NIFTY ETFs as of recently, but it’s all practically debt for us.
Prayesh Jain
Can I squeeze in one more question?
Vikas Jain
Yeah, please.
Prayesh Jain
Yeah. Just on the industry, the way things are shaping up, one is there is a price hike that has come through. Second is there is a lot of commentary on rejection of claims. Now there is, then there is commentary of hospitals not tying up with insurance companies or discontinuing the tie ups. And then now again there is talk of about insurance companies sending third party investigators at homes of people to check. The industry seems to be riled with negative news flow. Is this kind of impacting demand or how are you seeing this kind of behavior in the industry?
Krishnan Ramachandran
So I’ll make one comment and then I’ll request Ankur to address the question on demand. Yes, you’re right. There’s been a lot of recent negative press and I’ll only speak to health insurance. There’s been a lot of recent negative press around the topics that you mentioned. But what we did is to actually pull out the real data in terms of, there is publicly available data around in the MLs, around complaints per 10,000 claims, around complaints per 10,000 policies and claim settlement ratios. And actually we internally did an exercise to look at it. In the aggregate are we doing a better job, worse job or are we sort of doing what we’ve been doing on these three specific KPIs? Because that’s then a very data driven answer to, is the industry really experiencing this or is that there is just more negative reporting and the answer to this Prayesh and you can actually download the MLs and do this exercise for yourself.
On every KPI, the industry has actually improved; claim settlement rates. And when I say industry I’m referring to the aggregate of all the industry data on this. The claim settlement rate has improved. Complaints have come down both on the claim side as well as on the policy side. But the reality is that obviously the industry has grown, the absolute count of complaints has increased. But more broadly, if I have to sort of sum up the core issue that health insurance is grappling with, it is more a problem of perception driven by anecdote as opposed to what the data or the statistic is saying. Therefore, again, the council will be embarking on a fairly ambitious PR and awareness program and we would like to fundamentally combat this perception that because genuinely the industry on balance is doing a better job than it was doing three years ago. And this is something that you will also witness in the days and weeks to come specifically on. Whether this is having an impact on demand, I’ll refer to Ankur.
Ankur Kharbanda
Thank you. On the demand side as well if you look at all of the numbers, be it our numbers or the industry number, the industry is growing at a double digit today and we are also growing. You would have seen our number. We have grown at a 30% plus growth. So all of this is continuously happening for the industry and us as well from last few years now. So it is somehow we feel that there are so many levers which we need to work on which can really create demand and get customers to be insured, which helps the overall agenda of on insurance for all by 2047 as well. And as Mr. Krishnan also referred, all the industries coming together to create more demand and awareness together as well, the way some of the other industries are doing.
Prayesh Jain
Got it. Thank you, and all the best.
Operator
Thank you. The next question comes from the line of Ananga Rana from A91 Partners LLP. Please go ahead.
Ananga Rana
Hi, I had two questions. First is that given group health for us has grown much faster than retail. Just wanted to understand what is driving that growth between like employer-employee and the loan attached product. And again for both of these, what would be our outlook going into FY ’26? That’s my first question. The second is that our AUM also has grown much faster than our GDP. Now of course some of that would be because of the equity funding that we have done as part of our IPO, but wanted to understand if anything has changed on the business side because of which you will may be generating more AUM. Those were my two questions.
Ankur Kharbanda
So just to answer your first question, I will answer the first question. Largely, our contribution has been similar to what it was earlier except for the two large groups which we have, in the last quarter we have picked up. And that’s where our overall contribution towards the group side has gone up by 2.5% there. Otherwise our group business was trending towards 10%. Now it is getting towards 12%, 12.5%. That’s the difference between earlier and now. And as you mentioned, as earlier also mentioned, overall growth is at 32% which is a mix of both retail and group whereby all three segments, whether it is B2B, which is group or it is B2B, B2C which is the attached group and the retail, all of them are growing significantly.
Vishwanath Mahendra
Yeah. On AUM actually you’re right. So it has grown higher because of this capital raise, the primary capital raise we had. If you adjust for that, it is in line with our GWP growth. So no change as such in products or other things.
Ananga Rana
Got it. Thanks.
Operator
Thank you. [Operator Instructions] The next question comes from the line of Sanketh Godha from Avendus Spark. Please go ahead.
Sanketh Godha
Yeah, thank you for the opportunity. I have few questions. So on group health which is around INR2,185 crores for the entire year, can you give how much is contributed by benefit based plan and how much is employee-employer? A broader breakup and how the breakup looks for FY ’24, please if possible.
Krishnan Ramachandran
Sure. Sanketh, of the total book, 65% is — 65% orders is retail, about 13% is B2B or employer-employee as Ankur referred to. And the balance is benefit based. It’s not just benefit based, benefit based plus indemnity plus personal accident, broadly affinity business is about 22%.
Sanketh Godha
Okay, okay, got it, got it. And again data keeping question. Out of this INR4,400 crores of retail which is 65% of your total portfolio, how much is driven by three-year cover? And I just want to understand with 1/n accounting have you changed a bit of strategy to not to focus on three-year as such and any implication of that on the growth?
Vishwanath Mahendra
My three-year proportion is around 20%, Sanketh.
Sanketh Godha
Okay. And it was on a similar line last year or you toned it down in the current year with 1/n accounting?
Vishwanath Mahendra
Last year, slightly higher.
Ankur Kharbanda
It was slightly higher. We have not done specifically anything to tone it down but naturally it is going down because the distributor now may not get the full remuneration but will get it annually. And that’s the reason naturally some of the numbers will get toned down.
Sanketh Godha
Okay. It’s not a conscious decision from your side to slow it down. It’s more natural if it has come down a bit.
Ankur Kharbanda
Correct.
Sanketh Godha
Okay. And a couple of more things. One is your, maybe if you can give a bit of color of again that retail health to what extent it’s contributed from port-ins. If you’re okay to share that number.
Krishnan Ramachandran
As in the past, Sanketh, that number is in the 20s and this has been consistent with what we have updated in the past as well.
Sanketh Godha
So no material change as such in the current year compared to the last year, right.
Krishnan Ramachandran
No material change.
Sanketh Godha
Okay. Okay. And maybe if I can ask that has the company witnessed any intense competition in affinity products? Basically what you attach with the loans and typically where the long-term gets attached. Because of 1/n accounting from multi-line players especially who have very meaningfully better expense of management. Just wanted to understand whether the competitive intensity has meaningfully gone up in that line of business, which actually is very profitable segment for us.
Ankur Kharbanda
Yes, Sanketh, competitive intensity we’ve been seeing all across, not just this channel, all across goes up and down but specifically to this, there were some, you know, some of the competitors were trying to get in because of various reasons. But we have been able to get more accounts in this last six months. We’ve been able to get more number of partners as well in the last six months and we’ve been able to get more number of lines within our partner institutes within the last six months.
Sanketh Godha
Okay. So basically, broadly of your channel partners’ help in the growth. That’s the way I need to understand.
Krishnan Ramachandran
That plus depth, Sanketh.
Ankur Kharbanda
Both.
Sanketh Godha
Okay. Okay. And lastly with INR12 crores of other income what you reported in the shareholder account which looks a little higher than usual. What exactly it is related to? That’s the last question I have.
Vishwanath Mahendra
Sorry, can you repeat your question?
Sanketh Godha
In the shareholder account there is a other income line item which is almost INR12 crores, INR11.9 crores which seems to be meaningfully very high compared to your usual run rate. Just wanted to understand what it is related to.
Vishwanath Mahendra
Actually there were some debts, IIFL, RCap, etc., which were written off in the past. So they were recovery from those. So that’s the one.
Sanketh Godha
Okay. Okay. Got it. That’s it for my side. Thank you very much for answering my question.
Krishnan Ramachandran
Thank you.
Operator
Thank you. The next question comes from the line of Shreya Shivani from CLSA. Please go ahead.
Shreya Shivani
Yeah. Hi. Thank you for the opportunity. My first question is on our hospital network of 10,500 hospitals that we have. Can you help us understand how much of these, what percentage of these hospitals would be the corporate hospitals that we know of and what percentage would be just standalone hospitals? If you can give some broad indicative color, not an exact number is also fine. And is it possible to share how many of the hospitals would be present in bigger like Tier 1 and Metro cities and how much are like smaller cities and beyond? That’s my first question.
And my second question is also on your claim reserve, IBNR reserve, etc. So this there is definitely versus 4Q ’24 that number outstanding claim reserve as percentage of net claims incurred was about 67% or so in last year in 4Q ’24, this is down to 61%. I mean just wanted to understand how is our outlook on IBNR and IBNER book? Have we reduced that book in the quarter and in the year? Just wanted your understanding on that.
Vishwanath Mahendra
Sure. So, I’ll just address the second question first. So if you see the full year as a percentage of net incurred claim IBNR plus outstanding has not changed. On quarter-on-quarter there is certainly movement because of, there is different season of infection diseases. So sometimes when you have last quarter some infection etc. So you end up having higher outstanding in IBNR. So if you see whole year there is no change as such.
Krishnan Ramachandran
On the question around network hospital, first of all 80% of the claims as I mentioned earlier come from few hundred hospitals and the balance contribute 20%. The corporate hospitals in India are largely concentrated into larger cities. So in that sense the vast majority of hospitals are non-corporate hospitals. And I’m not referring to as standalone only, but this could be few hospitals here and there, but mostly as I said, standalone and few small chains contribute the largest part of this 10,500 odd hospitals that we have.
Shreya Shivani
Sure, sure. And just just to follow up on the IBNR question. So yeah, I did check that on annual basis actually your claim reserve plus IBNR has been range bound in FY ’25 to what it was in FY ’24. However, in the years prior, like say FY ’23, because FY ’22 becomes a COVID year, this was a much higher percentage. So have we become more comfortable in carrying lesser claim reserve now in the past two years versus what it was in FY ’23?
Vishwanath Mahendra
Yeah, so at that time we were keeping some reserve because there was apprehension that some claims may rebound. And we have seen that nothing of that sort is required now. So and this testing of adequacy of IBNR we do every quarter. So we are very comfortable with this number.
Shreya Shivani
Okay. Okay. Yeah, sure. This is very useful. Thank you. And all the best.
Operator
Thank you. The next question comes from the line of Akshay J from Xponent Tribe. Please go ahead.
Akshay Jogani
Thank you for the opportunity. Can you help us understand what claim incidence rates are like in retail business versus your employee-employer business?
Krishnan Ramachandran
In employer-employee, is that your question?
Akshay Jogani
Yes, the claim incidence rates in retail versus employee-employer business?
Krishnan Ramachandran
Typically, the employer-employee incidence rate tend to be higher than retail by maybe 4.5 to 3 percentage points, primarily driven by maternity because maternity is typically not a benefit that you offer in retail plans. So that’s broadly the gap.
Akshay Jogani
Sure. And what is like a steady state claim incidence rate for the retail book like? Is it sort of 4%, 5% or is it like 7%, 8%, 9%? What is it like for us?
Krishnan Ramachandran
Yeah, I’d say steady state you could expect 7%, 7.5% for retail.
Akshay Jogani
Sure. So you would be far lower than that right now?
Krishnan Ramachandran
We are lower than that. Yes.
Akshay Jogani
So as we grow and sort of book matures and say, let’s say our growth rates become somewhat lower than where we are today, should we sort of expect a higher incidence rate and intensity kind of grows at inflationary. So our claims ratios to then sort of inch up over the medium term?
Vishwanath Mahendra
I’ll just address this. So it is not just one factor. So it’s multifactorial. For example, I think it also has to do with age of the person. So as your book matures, the age of person on average age increases, but so is the increase in the premium you realize, because age is a raising factor. So yes, incidence rate inches up but that it doesn’t mean necessarily your loss ratio will go up. And also if you know loss ratio goes up then expense ratio goes down because if you have lot of renewal book so your expenses are much lesser there. So what we really look at combined ratio and return on equity. So doc, you want to add.
Bhabatosh Mishra
Yes, as Vishwanath mentioned, that’s true because age is a raising factor of 55-year old pays a higher premium than a 35-year old. So that adjusts for the enhanced morbidity rates which you can read it as frequency. And lot of this also is at the point of origin where appropriate underwriting, risk assessment, careful selection based on lifetime value models, etc. go towards manages the pool of risk or insured pool in the long run better than possibly one would expect. So these are inherently the inputs into eventual frequency of claims one would expect.
Krishnan Ramachandran
Look, I’ll add one more point. Any risk pool, if it’s sufficiently large would have some underlying steady state of morbidity, right? Of course as people age that will go up. But there’s also a continuous influx of younger lives, so there will be some steady state. It’s not that continuously incidence rates keep going up and people become sicker and sicker over time. And it starts to mirror the population plus something to because it is at the end of the day a large pool, but a selected pool.
So broadly incidence rate and the best proxy for that is to look at B2B portfolios. In the last 18, 19 years that we’ve been in this business those are range bound. Right? So it’s not that corporate incidence rates have been going up and up and up. They’ve been range bound between X and Y. Right? So the same thing will happen on the retail side. So therefore what you’re left with is to manage unit cost inflation for a mature book. And there the one important lever is to pass on that inflation every year through premium revision. But there are also the other levers that I refer to, including what Doctor just said around risk selection, making sure that your pricing adequately, cross-sell, upsell, claims management. So broadly, if you take a static view, claims ratios will go up. But then as an operator, there’s a range of levers that we will deploy to make sure that we manage the book to a target loss ratio, if you will.
Akshay Jogani
Sure, sure. So I just want to kind of squeeze in one last thought on this and that in our conversations with the channel, one of the things that sort of comes out is that over the last two, three years since COVID there has been a general significant expansion in incidence rates. And what we pick up is that as insurance has become more accessible, there is a perverse incentive for the health care industry to sort of, sort of get more hospitalization done because it’s now paid by some third party. Right? And as a result, the incidence rate seems to have shot up, which kind of is not getting under control and which kind of reflects in some of your peers’ numbers which are far, far higher than what you think is a steady state. Right? So is it something that you also see? Is this something that as an industry, kind of you all worry about? Would be great to hear your thoughts on it.
Krishnan Ramachandran
Structurally anywhere in the world, this is a problem to solve, if you will, in health insurance and certainly during COVID we have also put that out in our presentation. There was a significant increase in inflation and it did not revert. Right? So it’s moved up from a fairly sizable jump. And there is certainly been — any third party payer system anywhere in the world suffers from this incentive of, you know, fraud, waste and abuse, let me call it that. But the problem to solve, and it is an ongoing problem, you know, at the industry level, we are addressing it, as an operator we address it through all the levers that I described. Is it a problem? The answer is yes. Do we need to manage it and are we managing it? The answer I give to that also, you know, has to be yes.
Akshay Jogani
But you don’t see that kind of going out of control and sort of leading to far worser economics than they are?
Krishnan Ramachandran
No, we are — we don’t see that going out of control.
Akshay Jogani
Sure. No, that’s helpful. Thank you so much.
Operator
Thank you. The next question comes from the line of Gaurav Nigam from Tunga Investments. Please go ahead.
Gaurav Nigam
Thank you for taking my question. The first question was on the term that you use, just wanted clarification. You use the term claim inflation. I think some of your peers use the term medical inflation. Is there a definition difference or just you’re using the same definition?
Krishnan Ramachandran
It’s the same.
Gaurav Nigam
Okay. Some of your peers are talking about double digit inflation while you’re experiencing mid single digit inflation. That’s the correct way, right? Just to clarify.
Krishnan Ramachandran
Yeah. Look, I mean I can talk to what our portfolio is experiencing.
Gaurav Nigam
And the second question was on the hospitals. Again one of the earlier analysts asked about this hospitals blacklisting from the insurance companies and we keep on hearing some of these things. Is there anything which insurance companies do to understand the hospital satisfaction and is that an important metric? I mean, and how are you doing — I mean how are you ensuring that? Because providers are one of the important ecosystem partners. How are you ensuring that they are fully responsible and continue to work with you?
Bhabatosh Mishra
Thank you for that question. We do check. And the team, our robust provider management team regularly periodically engages with hospital, our network hospitals and several non-network hospitals as well. It’s a collaborative process. The collaboration is with regards to these following things. One, obviously the tariff, the cost of treatment, etc. The second is processes. How easy for the hospital and help them with this patient, customer in the most effective timely manner. And third is of course, discussions around protocols and treatment protocol applications. Right treatment for the right kind of condition. These are the three important levers on which we periodically engage with hospitals and that yields good results.
Gaurav Nigam
Sorry, sir. I mean just wanted to understand is there something which you are doing differently from others? Is this something that you are only uniquely doing? You just want to understand this? I mean what is the Niva Bupa is doing differently on this?
Bhabatosh Mishra
Well, I can speak of few initiatives which we feel unique but I wouldn’t have the complete overview of everybody’s initiatives. Let me start with Preferred Provider Network I mentioned earlier as well. 40 cities, nearly 600 hospitals. These are, excuse me, these are quality hospitals delivering quality treatments at affordable cost. That is an initiative we continue to scale up and see at least 15% of our claims in this cities and increasing number is moving to PPN. That’s one. The second initiative is analytics-driven triggers for billing review to ensure that the billing practices by the providers follow the SOC norms and what is agreed between us. That’s the second one. And third one is as I mentioned, things like case management which is direct engagement with treating doctors on protocol applications, right amount of stay required for a certain procedure or treatment in hospitals, things which are very medically oriented, where a doctor speaks to a doctor defining what is the right treatment for that condition with for the right duration of stay.
Gaurav Nigam
Very interesting, sir. Thank you for sharing detailed answer. Thank you, sir.
Operator
Thank you. The next question comes from the line of Bhuvnesh Garg from Magma Ventures. Please go ahead.
Bhuvnesh Garg
Yeah, thank you for the opportunity. A couple of questions from my side. Firstly, on the product side. So as you mentioned that there is a tendency for some people to abuse the product benefit. So are you making any changes in your product structure so as to reduce this leakage? And also what are your targets and how you are tracking your progress on those lines? Yeah, that’s my first question.
Bhabatosh Mishra
Let me start with saying this that insured population is a selected pool and any selected pool tends to exhibit what you colloquially refer to as fraud, abuse and waste. Not just at the end of a consumer, but at the end of the provider as well. Several changes, several provisions in product already in place. And we continue to deploy more such things in revision of products and new products we bring in to manage this. So there is tremendous benefits that we have brought into product where judicial behavior by customer creates more value for them. For example, carrying forward the sum insured, smaller deductibles so that the premium goes down and customer enjoys the benefit of events which is beyond the threshold of certain claims, small claim values. So we deploy starting from very small as INR20,000, INR10,000 deductible, all the way up to INR5 lakh deductible etc. So in products we already have such provisions and we continue to build more to manage potential abuse that may happen.
Now as you refer to the fraud, it is something that is very empirically analytics driven fraud triggers that we use. These are learning models which factor in trends that emerge. Because this is something that every insurer like us have to continuously upgrade. We deploy such sophisticated tools, techniques and methodologies to detect fraud and eliminate them. On the waste part, I have already covered in the earlier question things like case management, length of stay management and billing review with regards to the provider part.
Bhuvnesh Garg
And any data if you can share that how in numbers you are tracking this progress? Like number of cases, fraud cases prevented or how much benefit your initiatives are delivered to your claims ratio? Any number you can share.
Krishnan Ramachandran
We’ll share that offline. We can take that — happy to share that offline.
Bhuvnesh Garg
Sure, sure. And second question is on your average age of retail indemnity customer, how it has changed in FY ’25 versus FY ’24.
Krishnan Ramachandran
Broadly, the age you know has not changed significantly. It’s been — the average age has been in the mid-30s. It’s not changed significantly.
Bhuvnesh Garg
Okay. Okay. So considering that your claims ratio has increased year-on-year. So can we say that within that same cohort customer has shown the kind of worst behavior. So can we conclude that way?
Krishnan Ramachandran
No. I mean the thing is it’s to do with the product design. Right? So every product has waiting periods, exclusions, which go away over time. So it’s not that behavior gets worse. Of course morbidity curves go up with age. But as Vishwanath already mentioned, all our premiums are age is a rating factor. So the premium that’s charged is appropriate for that age, it’s not that we cross subsidize across ages. So it’s more to do with product design and how that plays out over time.
Bhuvnesh Garg
Okay. Okay. And sir, what is our rejection rate in incoming cases? You said that you have a lot of focus on the risk selection. So what is our rejection rate and how it has changed year-on-year?
Bhabatosh Mishra
That is reflected in our claim settlement issues which has consistently moved up year-on-year closer to about 93% settlement ratio now, which means…
Bhuvnesh Garg
No, no, sir, I’m talking about onboarding a customer. I mean, so whenever a customer approaches you for insurance. So how many of those customer you reject and how many of those customers you accept?
Bhabatosh Mishra
Less than 2% of customers we are currently unavailable to offer appropriate product.
Krishnan Ramachandran
That’s not a very useful statistic from your standpoint. Because what happens is over time the distribution understands what’s the risk assessment and risk acceptance philosophy of a company. And over time they bring in only cases that they believe will be accepted by the company. They would rather take the policy somewhere else because they get to know the policy of a company. So not a very informative statistic in that sense.
Bhuvnesh Garg
Understood. And how is our retail lives covered has changed in FY ’25 versus FY ’24. Number of retail lives covered.
Bhabatosh Mishra
Number of retail lives have grown up by around 18% last year.
Bhuvnesh Garg
Okay. In FY ’25?
Vishwanath Mahendra
Yes. Okay. Okay, answer. What’s our guidance for FY ’26 and ’27?
Krishnan Ramachandran
We can take that offline.
Bhuvnesh Garg
Okay, fine. Fine, sir. That’s it from my side. Yes, thank you.
Operator
Thank you. The next question comes from the line of from Prayesh Jain from Motilal Oswal Financial Services Limited. Please go ahead.
Prayesh Jain
Yeah, hi. Thanks for the opportunity again. Just one question. Could you give us some indication on loss ratios on your three-year cohort? Say the retail indemnity book that you would have written in FY ’22, what kind of loss ratios it would be trending at. So that can help us understand what’s the kind of color of the book?
Krishnan Ramachandran
See, Prayesh we can specifically answer that offline. But broadly, as we have indicated in the past, idea is to manage the overall renewal book to a loss ratio of about 75% and we are in that ballpark.
Prayesh Jain
Got that. Got that. Thank you.
Operator
Thank you. Ladies and gentlemen that was the last question for today. I would now like to hand the conference over to the management for the closing comments.
Krishnan Ramachandran
Firstly, thank you very much for your time late in the evening today and thank you for your questions. In closing, I want to say that we continue to be very excited about the health insurance opportunities. Yes, as many of you have articulated, there have been some challenges, especially around perception around the industry. There’s been rapid regulatory changes in the interest of the policyholder. But on balance, we believe that we have the right business model to continue to deliver, to continue to capitalize on the opportunity and to continue to deliver solid multi stakeholder results; customer, employee and shareholder. Thank you again and look forward to a new financial year.
Operator
[Operator Closing Remarks]