Star Health and Allied Insurance Co Ltd (NSE: STARHEALTH) Q3 FY23 Earnings Concall dated Jan. 31, 2023
Corporate Participants:
Pratik Patil — Investor Relations
Anand Roy — Managing Director
Prakash Subbarayan — Managing Director
Nilesh Kambli — Chief Financial Officer
Analysts:
Sahej Mittal — HDFC Securities — Analyst
Avinash Singh — Emkay Global Financial Services — Analyst
Swarnabh Mukherjee — B&K Securities — Analyst
Anshuman Deb — ICICI Securities — Analyst
Shreya Shivani — CLSA — Analyst
Prayesh Jain — Motilal Oswal — Analyst
Sanketh Godha — Spark Capital — Analyst
Dipanjan Ghosh — Citi — Analyst
Manish Gupta — Solidarity — Analyst
Anand Bhavnani — WhiteOak — Analyst
Bhavin Pande — TrustPlutus Wealth — Analyst
Anirudh Shetty — Solidarity Investment Managers — Analyst
Pankaj Murarka — Renaissance — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Star Health and Allied Insurance Company Limited’s Q3 and Nine Months FY ’23 Earnings Conference Call. [Operator Instructions]
I now hand the conference over to Mr. Pratik Patil from Adfactors PR Investor Relations team. Thank you, and over to you, sir.
Pratik Patil — Investor Relations
Thank you, Aman. Good evening, everyone.
From the senior management we have with us Dr. S. Prakash, Managing Director; Mr. Anand Roy, Managing Director; Mr. Nilesh Kambli, Chief Financial Officer; and Mr. Aneesh Srivastava, Chief Investment Officer.
Before we begin the conference call, I would like to mention that some of the statements made during the course of today’s call maybe forward looking in nature, including those related to the future, financial and operating performances, benefits and synergies of the company’s strategies, future opportunities and growth of the market of the company’s services. Further, I would like to mention that some of the statements made in today’s conference may involve risk and uncertainty.
Thank you, and over to you Mr. Roy.
Anand Roy — Managing Director
Thank you, Pratik, and good evening to everyone and thanks for joining the Star Health earnings call.
My name is Anand Roy, Managing Director of the company. So I’ll be taking you through the performance of the company for quarter three 2023 and nine month FY ’23. I’ll give you a brief overview of the industry trends and developments that we have witnessed in the last few months as well and walk you through the company’s performance in terms of premium and distribution. My colleague, Dr. Prakash, will cover the financial performance and aspects related to the claims, including the steps that we’re taking to manage them. In quarter three 2023, the health insurance industry including personal accident has grown by 24.6% driven by 32% growth in group health and 17% growth in retail health.
Now we will talk about the growth and market share for Star Health. For nine months 2023 our retail health growth is 19.4% versus the industry retail health growth of 14.9% that is we are able to grow at 1.3 times the industry’s growth rate despite a very large base. In quarter three of 2023, our retail health segment grew by 17.9% versus industry retail health growth of 16.8%. Overall GWP for Star Health grew by 15% in Q3 FY ’23 versus 11% in Q2 FY ’23 over the same period of last year. In Q3 FY ’23 Star Health registered 34% market share in retail health, which is 3x the second-largest player in the industry.
For nine months 2023, our retail health market share is 33%, an increase of 120 bps over nine month FY 2022. We continue to grow higher than the market growth rate and continue to increase our retail health market share. As far as accretion share is concerned, Star Health has registered 42% retail health acquisition market share in nine month FY ’23. Agency business continues to contribute around 82% of the overall business for our company. Our agency strength has increased to 609,695 with an addition of approximately 23,700 agents in Q3 FY ’23. We are on course to add 80,000 to 100,000 agents in the current financial year, which was our target. With improving agency productivity, we are confident of maintaining our market leading position in this business.
For nine months ’23, corporate agents that is banks and other tie-ups continues to remain strong and our premium has grown by 49% from this particular channel. Some of the highlights in Q3 FY ’23 for us, whereas follows. We are focusing on premiumization of our policies and the average sum assured of new policies has increased by 13% on a year-on-year basis to 8.8 lakhs per policy.
We have implemented a hike in our flagship product, which is called the Family Health Optima to combat the structural rise in medical inflation post-COVID of approximately 25% premium increase effective from February 1, ’23, that is tomorrow on new policies and May 1, ’23 on our renewal book. We have renewed our partnership with one of our leading bank partner Punjab National Bank for a long-term period and we have also tied-up with a reputed foreign bank and since the paper work is in progress I’m not able to give the name now, but we’ll be able to further strengthen the sales of our products through the bancassurance channels that we have tied-up with. The premium from benefit products has grown by 70% in nine month FY ’23 over corresponding period last year. The share of such products within overall GWP has increased by 79 bps to 2.3% in nine month FY ’23 from 1.6% in nine month FY ’22.
Rural business for us has grown by 48% during quarter three of this financial year over quarter three of last financial year. The number of rural agents has also grown by 69% to 3,861 agents in this particular quarter. Some of the outcomes of our digital initiatives are, our app downloads at least 1.85 million downloads. The Star Power customer facing app is now available both on the Android and iOS platform. And the digital sourcing of our business, which we define as a premium collected directly from our website, as well as through third-party web aggregators and online brokers has grown by 27% Y-o-Y and now accounts to close to 10% of our overall GWP in nine month FY ’23. Organic traffic to the website has grown by 44% in Q3 FY ’23 of the same period last year and 14% sequentially over Q2 FY ’23.
I now request my colleague Dr. Prakash to take you through the highlights and financial matters.
Prakash Subbarayan — Managing Director
Thanks. Thanks, Anand.
Let me talk about claims initiatives and outcomes. We are working on a four-pronged strategy to effectively manage claims. Number one, prudent claims settlement based on rich medical wisdom and insurance expertise. Well negotiated volume based pricing arrangement with network hospitals, which gives us operating leverage in terms of lower average claim size. Then technology enabled fraud detection and mitigation. The fourth one is risk based pricing through micro-segmentation of portfolio. So we can say today that 80% of the amount in this nine months of FY ’23 are settled in claims through cashless. Cashless turnaround time remain around 90% within two hours.
Auto adjudication of claims helps in drastically improving turnaround time and thereby customer satisfaction. 17% of our network hospitals have been on-boarded under this initiative. And the number of such auto adjudicated claims settled has risen to 40,000 in quarter three FY ’23, a growth of 21% versus quarter two of FY ’23. We continued to improve on the claims related milestones. Within overall cashless claims the share of hospitals with pricing arrangements — hospitals pricing arrangements for surgical packages, room rent, professional charges, all these things is around 76% versus 64% in financial year ’22. As you will be aware, fraud control is one of the critical factors to address in a retail health insurance business.
Our anti-fraud digital initiative have become operational this year and have started to produce savings in claims outdoor. There is a 1.2% incremental benefit in terms of lower claims ratio in Q3 of FY ’23 compared to Q3 of FY ’22. This is in line with our expectation of more than 1% reduction in claims ratio mentioned in the previous results call.
Coming to the financial performance, we are focused on sustainable and profitable growth and also taking our decision to achieve that goal. Combined ratio for the nine months of FY ’23 has improved to 96.9% versus 125% in nine months of FY ’22. Improvement in combined ratio is achieved through claims ratio improvement. Combined ratio in Q3 FY ’23 for the quarter was 94.8% versus 135.7% for the quarter Q3 FY ’22. Claims ratio for nine months of FY ’23 has improved to 66.1% versus 94% in the same period last year. Nine months 2023 claims ratio has 0.5% impact of COVID claims. The claims ratio in quarter three FY ’23 has improved to 63.7% versus 104.6% in quarter three of FY ’22 and this was 68.2% for quarter two FY ’23.
As mentioned in the H1 FY ’23 results call, while Q3 is prone to epidemic-related claims generally, we did not see any major impact during this quarter. For the month of January also the claims ratio is approximately around 62.3% and the YTD claims ratio as on January end is approximately 65.7%. We reiterate our claims ratio guidance now, that we are 10 months in the year. Expense ratio has fallen slightly in nine months to 30.8% on account of efficient cost management as evidenced by a reduction in expense ratio in Q3 FY ’23 to 31% from what was 31.2% in Q3 FY ’22. You will appreciate that the expense ratio has remained stable, in spite of a significant cut back in the group business, which has a lower expense ratio.
So the nine months of FY ’23 recorded a profit before tax of INR690 crores and profit after tax of INR517 crores. Adjusted profit after tax, excluding non-business ESOP cost is INR627 crore in nine months of FY ’23. For quarter three 2023 the profit before tax is INR282 crores and profit after tax is INR210 crores. Our investment assets have grown to INR12,079 crore in the nine months of 2023 versus INR10,441 crores in the same period last year. This stability in claims in the trailing 12 months, we have successfully transitioned to the premium basis of solvency during this quarter. Solvency as on December 31, 2022, is 2.17 times compared to regulatory requirement of 1.50 times. This solvency is achieved through only mandatory 4% reinsurance.
To conclude, we continue to believe in the profitable growth opportunities available in retail health segment and we are on desired path of realizing the same. Thank you.
Operator
Sir, should we open the line for Q&A?
Prakash Subbarayan — Managing Director
Yeah, we can open it up for Q&A.
Questions and Answers:
Operator
Sure, sir. Thank you very much. [Operator Instructions] The first question is from the line of Sahej Mittal from HDFC Securities. Please go ahead.
Sahej Mittal — HDFC Securities — Analyst
Hi, good evening, everyone. Thanks for the opportunity. So firstly, on the loss ratio is right, so if you can just give out some numbers around what are loss ratios in the FHO book, Star Comprehensive book and Young Star book for nine months in Q3. Before it becomes very important to understand, where this improvement in claims ratio is coming from? Which product is actually driving the improvement? Given that we have already taken price hike of 25% in our flagship product. So the claims ratio were inferior. So if you can give us some sense on that? That’s the first question.
Anand Roy — Managing Director
See this is what we always adapted comprehensive approach in controlling claims. And we monitor every product and we see whether it remains within the threshold. And if it is close to or if it is crossing the threshold, then we go for pricing division. But product wise may not be — overall approach is on how we can effectively manage claim, look at a better pricing arrangement with hospitals and also address on potential frauds. Detecting these frauds and mitigating the fraud, like these are the priorities that we know we have adapted to achieve our ICR and frequency.
Sahej Mittal — HDFC Securities — Analyst
No sir, so, I mean, our loss ratios for Family Health Optima was at 93% for FY ’22. So where are we on this book for nine months FY ’23, given that this is the largest portion of our book? So what is the claims ratio for Family Health Optima versus the 93% in FY ’22?
Nilesh Kambli — Chief Financial Officer
See Sahej, no, the product level loss ratios are not in the public domain. That’s a competitive information. The price hike is effective February 1, 2023 and we have given guidance that whenever the loss issued reaches a certain threshold we going for the price increase. You know it’s 65% to 70%, that we have maintained that. Once it starts stretching that levels, we going for a price increase.
Sahej Mittal — HDFC Securities — Analyst
I was reading into the loss ratios from the public domain itself on what you have disclosed for FY ’22, which says that the loss ratios for FHO book was at 93% and for Star Comprehensive at 64% — for Star Comprehensive and Young Star at 64%, 65% for FY ’22. So…
Nilesh Kambli — Chief Financial Officer
Yes, so that’s a full year disclosure that is mandated as per IRDAI. So once the full year is over we will put that in top.
Sahej Mittal — HDFC Securities — Analyst
Right. So, I mean, even if you don’t want to give out those numbers, if you can give us some sense that the loss ratio for Star Comprehensive and Young Star, if they were at 64% for FY ’22, so have the loss ratios in those buckets improved materially or that there itself whereas FHO book have seen them…
Nilesh Kambli — Chief Financial Officer
See FY ’22 when you look at the loss ratios they had the impact of COVID. So you know it’s difficult to compare FY ’22 vis-a-vis FY ’23, because there is a COVID impact in FY ’21, that the reason…
Sahej Mittal — HDFC Securities — Analyst
But the improvement — is it fair to assume that the improvement has largely come from the back of FHO book?
Nilesh Kambli — Chief Financial Officer
It’s all round improvement. I do not know how you are trying to understand whether it is through FHO book, because FHO price hike is being contemplated and it is yet to be rolled out.
Sahej Mittal — HDFC Securities — Analyst
Right. Got it. Maybe I’ll take this offline. So if you can just share of what’s the share of FHO in our current book as of for nine months?
Nilesh Kambli — Chief Financial Officer
Around 46%.
Sahej Mittal — HDFC Securities — Analyst
Got it. 46%, right. And so next was on growth, right. So given that for us the growth in the retail business has moderated to about 18%, 19% for this year. How should we look at the growth for the retail business, given that we are still very aggressive on the agency channels, so for the next maybe two, three years, can that [Technical Issues]. Hello?
Operator
Yes, Mr. Mittal. Sir, please go ahead.
Anand Roy — Managing Director
Maybe you can join the queue later.
Operator
Sir, it seems there is no response from the line of Mr. Mittal. We’ll move to the next question that is from the line of Avinash from Emkay Global Financial Services. Please go ahead.
Avinash Singh — Emkay Global Financial Services — Analyst
Yeah. Hi. Good evening. First one on this, repricing of price hike on this Family Health Optima for new and renewal. The question is that, I mean, what sort of comfort do you have around retention in case of old book and in case of growth as far the new business is concerned because of 25% kind of a price hike is — correctly, is namely, I would say a material price hike for a health product. And particularly in that competitive environment, so how comfortable or confident are you on the retention as well as a growth with this current price hike?
Anand Roy — Managing Director
Hi, Avinash. So we have of course evaluated all the various angles before we arrived at this price hike, both from the competition point of view as well as from our internal strategy point of view. So, as you may be aware that the Family Health Optima has four zones in which it is divided, though the overall price hike is 25% zone wise price hike varies. So we have kind of aligned the price hike to ensure that the retention book is not disturbed and total new business also can be assured. So we are very confident of managing that.
Avinash Singh — Emkay Global Financial Services — Analyst
And you have got this, I mean, regulatory go ahead or it will like use and then file repricing?
Anand Roy — Managing Director
We have got all the go ahead, all the systems are ready, we are rolling out tomorrow morning.
Avinash Singh — Emkay Global Financial Services — Analyst
Okay. And secondly on the banker side, now of course you are adding incrementally, particularly on the public sector banks. Now sort of — of course, growth here is strong, but what kind of eventually two, three year out, what kind of a share from that distribution mix you see in your overall business mix? I’m asking — assume that, you would be offering kind of group of product or like it is sold as individual product in bank branches?
Anand Roy — Managing Director
So banca, our strategy is very — we have very aggressive plans to expand our book in the bancassurance space. We have shown very good performance in the first nine months, but we believe that there is tremendous opportunity to grow further because of the regulations which has changed. Now banks are allowed to have tie-ups with nine insurance companies each. So we are in talks with some of the potential partners. So as we speak our contribution from bancassurance is — we have already done more than 10% in terms of our new business contribution. We want to take this up further. But this business is growing very fast for us. And you know the business, both retail as well as benefit products which are attached as part of mortgage loans and other loans given by the banks. So I think this is also a very profitable segment for us. We are focusing big time on this.
Avinash Singh — Emkay Global Financial Services — Analyst
Okay. And the full-year combined ratio for FY ’23 95% is maintained?
Nilesh Kambli — Chief Financial Officer
Yeah. We have done a range of 90% to 95%, we stick to our guidance.
Avinash Singh — Emkay Global Financial Services — Analyst
Okay. Perfect. Thank you.
Operator
Thank you. The next question is from the line of Swarnabh Mukherjee from B&K Securities. Please go ahead.
Swarnabh Mukherjee — B&K Securities — Analyst
Yeah. Thank you for the opportunity and congrats on good set of numbers, sir. So first question is on the URR reserving. So I just wanted to understand how to think about this numbers? In Q2 I think we reserved almost like INR244 crores worth. And this quarter where I think there would be a higher share of unearned premium we are reserving around INR76 crores. So I just wanted to understand, how to think about this number and what should we think about it for Q4?
Prakash Subbarayan — Managing Director
See, Swarnabh, when it comes to URR you don’t have to take the quarterly numbers, it’s trailing 12 months number that you have to take. You have to month-wise you put the premium month wise in the table and you take URR charge every month basis, because it’s 1/365 rule. So very difficult to put a number on an incremental basis, it follows the trailing 12 months premium. So Q4 there’ll be a charge in the P&L because Q4 is the biggest quarter. Even now if you split the business between Retail and Group because we have degrown in group, it looks to me that the earned premium is slightly higher than the net written premium. But if we split it — retail and group, retail, the net written premium is higher than the net earned premium.
Swarnabh Mukherjee — B&K Securities — Analyst
Okay. Got it. And in terms of sir, in terms of the guidance on growth not for this year for the next say couple of years, given that we are almost, I mean, more than third of the industry and this year I think we have so far kind of grown in and around the lower end of our guidance range. So how should we think about it going ahead? Should we think about like a 20% kind of number for say FY ’24, FY ’25, your thoughts on that?
Nilesh Kambli — Chief Financial Officer
So, see the headline growth for this year may look little muted because of the strategic choices we made on group business. But our area of interest, which is the retail health insurance, we have out beaten the market by substantial margins despite having a large base. So I think the growth has been as per our plans, but more importantly, we are focused on a sustainable and a profitable growth model rather than just growth for the sake of growth. We have taken some calls even within the retail space in terms of acceptance of business in terms of tightening our underwriting guidelines. So that we have a very long-term view of this business and ensure that the quality is also maintained rather than the quantity alone.
So going forward for the next two to three years, we believe that we will grow much faster than the industry. As far as retail is concerned, the industry is typically growing at 14%, 15%, so we should ideally grow at similar rates at which we are looking at. And hopefully from next year the group business growth also will kick in because of the 12 months of our plan is playing out this year. So overall basis, yes, I think we should be able to deliver around that number, which you mentioned around 20% growth is something that we look forward to.
Swarnabh Mukherjee — B&K Securities — Analyst
Sure sir. And just about an indication for Q4, if you could maybe give some color on what would be the loss ratio, which we have maybe you are seeing in January. And given that Q4 would be a higher scale quarter. So should we be seeing a significant better profitability outcome as compared to what we have seen in Q3?
Anand Roy — Managing Director
Historically, Q4 is better in terms of loss ratio as well as combined ratio. So Swarnabh, whatever guidance we’ve given for the full year, we will achieve the guidance of 93% to 95% combined ratio.
Swarnabh Mukherjee — B&K Securities — Analyst
Okay sir. Got it. Thank you and all the best.
Operator
Thank you. The next question is from the line of Anshuman Deb from ICICI Securities. Please go ahead.
Anshuman Deb — ICICI Securities — Analyst
Yeah. Good evening sir and thanks for the opportunity. So the first question is like — our guidance, I’m just rechecking, it is anyways factoring the price hike that we are contemplating. So that is question number one. And the question number two is that, in terms of new business growth, in terms of we have been able to increase the sum assured, but what is the outlook looking at, for example, in the new business growth in terms of new policies or what is the outlook? Because that was I think little muted in nine month. And my last question is on the — kind of composite license and what is our take on that? And if any possible [Indecipherable] threat can come from LIC agents going to maybe selling LIC product going ahead, instead of any other company, that’s the case in point of the threat from opening of this composite license there? These are the three questions.
Nilesh Kambli — Chief Financial Officer
I’ll answer the first question. So in terms of price hike, the price hike is effective Feb 2023 for the new policies. So the guidance in terms of loss ratio does not change because you know the earned premium will come in the next year and the current price hike will get applicable only for the new policies, for the next two months and after three months it gets applicable for the renewal business as well. Does that answer your question, Anshuman?
Anshuman Deb — ICICI Securities — Analyst
Yeah. Got it. Yeah.
Anand Roy — Managing Director
See as far as the new business growth is concerned on the retail side, and the first quarter was a very negative growth for us as well as for the entire industry because of the huge base of last financial year same period, because of the delta variant the sales are very, very high. But we have seen very positive growth in quarter two and quarter three. And as we end the year, the lag effect of the first quarter still remains as you rightly said, so it’s kind of neutral growth right now. But as we end the year, we are confident that we will achieve good positive numbers. And traditionally our new business has been growing very positively and we don’t see any reason why that will not happen this year too.
As far as your second question of about Life Insurance companies coming into this domain, we have been reading about that and we are still in their exposure draft stage, we will see how that pans out. But as far as our business model is concerned, see Star Health is not a new start up, we are a 15-year-old market leader in this industry. And as much as other companies have affinity towards their agents, our agents have a strong affinity with Star Health. And many of the people who are working with us for a long time, have a very strong customer base and trailing commission with the company. So we do not see any major threat in terms of any one taking away our channels and our distributors. What we believe is that, this may affect the smaller players, but being a very large player in this segment, we don’t see any major challenge here.
Anshuman Deb — ICICI Securities — Analyst
Understand, sir. There was also media news that we have applied for a life insurance license, any kind of insights on that?
Anand Roy — Managing Director
It’s just an exposure draft, it will have to go through various stages before it goes through. So still some time to play.
Anshuman Deb — ICICI Securities — Analyst
Understood, sir. Thanks a lot. I’ll get back in the queue.
Operator
Thank you. The next question is from the line of Shreya Shivani from CLSA. Please go ahead.
Shreya Shivani — CLSA — Analyst
Hi, thank you for the opportunity. Congratulations on a good set of numbers. I have three questions. First is on the Insurance Amendment Act. There are multiple unanswered questions in the draft, obviously, as you’ve mentioned. So I just wanted your insights into — in case there is any change in the way agent relationships are defined, like right now size have an advantage of onboarding life insurance agents. What kind of targets would you keep for your agent addition? Will that get disrupted? What are your views on that? First is that.
Second is on the benefit policies, if possible can you share the kind of loss ratios that you see on this book? And how large do you plan to make this book like if it’s around 2% of your portfolio right now, how large would it become over two, three years? What if any guidance you can give about that? Last is, if I calculate the retail premium of new business, removing the renewal part, over nine months over nine months or 1H last year, seems like the new business premium has sort of slowed down, it’s more or less flattish now and more growth coming from the renewal part. So any insights you can give to us about what is happening with the new business part of the book? Thank you.
Nilesh Kambli — Chief Financial Officer
Yes. So see on the agent addition side, we will be adding close to 90,000 to 100,000 agents this year also. And we hope to continue doing that, given the regulations as it stands today. But the draft regulations do not talk about taking away the benefits of SAHI. The draft regulations talk about allowing composite licenses to come into play. So we will see how that pans out. But just for your information, you might be aware that we also do have a very large proprietary agency force of about close to 100,000 agents, who are licensed which Star Health Insurance exclusively from us. So that will continue to be our focus area also and will continue to add agents in that category.
As far as our benefit plans are concerned, right now, as you mentioned it is 2%, it is still a very small base, but growing fast and this will grow further because we have tremendous focus on our bancassurance and partnership models. And also within our own ecosystem, we want to distribute retail benefit plans. We have a wonderful critical illness product, which is very unique and very, very, beneficial to the customer. So from 2%, our aspiration is to take it to around 10% levels in the next two to three years’ time, with our partnership as well as through our direct distribution. And new business, I’ve already mentioned, our new business growth is positive for the last two quarters, in fact quite handsomely positive. But the first quarter of this financial year was negative growth for us as well as for the industry because of the large base effect of the previous financial year. And we hope to end this year in a very positive note even on the new business.
Shreya Shivani — CLSA — Analyst
Sure, sir. Thank you. That answers my question.
Nilesh Kambli — Chief Financial Officer
Thank you.
Operator
Thank you. The next question is from the line of Prayesh Jain from Motilal Oswal. Please go ahead.
Prayesh Jain — Motilal Oswal — Analyst
Yeah. Hi everyone, congratulations on a great set of numbers. Firstly on the loss ratio, so you’re saying that you are already at 62.4% for the month of Jan. And the price hike is not kicked in yet. So you said that variables, do you think that your loss ratios could actually be go down below 60% as well after the price hike? Because it contributes to 25% price hike on a share of 46%. It’s a big number that will come through. So do you really — do you think that the loss ratios can go below 60% as well in time, in say possibly first quarter or second quarter of next year, wherein the full benefits will start pouring in of this price hike?
Nilesh Kambli — Chief Financial Officer
Prayesh, what happens is the new business price hike will be effective 1st Feb and the renewal business will be effective 1st May. The earnings will happen over 18 months to 24 months. The price increase of the premium does not reflect in the earnings, which has a bigger impact on the loss ratio. Second is, as we keep on taking the price increase, there is inflation and other products as well. So it’s moving cycles — it will move in cycles.
Prayesh Jain — Motilal Oswal — Analyst
Right. So in a way you’re anticipating the claim ratios to — the claims to move higher and that’s the reason you are taking these price hikes? Would there are 62.4% with the –current inflation with 62.4% loss ratio, why would we need a price hike?
Prakash Subbarayan — Managing Director
Price hike is not decided based on the overall loss ratio. We have our strategy to study behavior of the product-wise. We study the loss ratios of individual products and we take a call.
Nilesh Kambli — Chief Financial Officer
And to add, Prayesh, 62.4% is only for the month of Jan. For quarter three it is 63.7%. So there is seasonality and cyclicity also in the business. So month ratio cannot be a guiding factor for…
Prayesh Jain — Motilal Oswal — Analyst
62.4% is more because of frequency rather than superiority, right?
Anand Roy — Managing Director
We cannot say that. We cannot say that it’s like, superiority does have a rule. And frequency we don’t see huge fluctuation in this nine months of this financial year.
Prayesh Jain — Motilal Oswal — Analyst
Okay. Now coming to another part wherein now that you’ll be taking a 25% price hike. I think in a way you’ve answered this question, but from a retention perspective, your — even in terms of your claim rejection has gone up, right. So while you — right in terms of rejection of fraudulent claims, but do you see this coming to be out as the bad word of mouth and would impact your retention ratios? And are you comfortable with the 94% level, how do you see this panning out going ahead?
Prakash Subbarayan — Managing Director
Our decision to reject a claim has no correlation to the overall ratios that you are talking about. So it all depends on a claim-to-claim basis. Our prudency is in studying the admissibility of a claim and our business model is more agency driven. So we are looking at every claim based on so many factors and trying to see the — if a claim is not admissible as per the policy terms, then it cannot be entertained. And there is no big change in the rejection number in the — if I look at the last three quarters, I don’t see any big change in the rejection numbers.
Prayesh Jain — Motilal Oswal — Analyst
Okay. Got that. And so from a growth perspective, you mentioned that the group business can see a recovery now, that the entire piece of business is gone. And that you wanted to move out now out of the base. So, one obviously what kind of growth we should presume say in FY ’23 base in the group health business for say next couple of years? And this would be driven by our kind of policy?
Anand Roy — Managing Director
So see as far as group business is concerned, we are looking at — our strategy is to focus on the SME segment, which is the sweet spot that we prefer, typically companies with 500 lives or maximum 1,000 lives in their roles. So that’s the sweet spot for us and we are looking at that segment. This is almost a quasi-retail model, most of this business comes from our agency force from some of the broking relationship in the bancassurance partnerships that we have. And while the group business, the negative effect of that will get completed by the end of this financial year and next year we hope that we should be able to grow this business also in line with our retail business. So achieve an overall growth which we are aspiring for which is around 20% odd.
Prayesh Jain — Motilal Oswal — Analyst
Great. Thank you and all the best.
Operator
Thank you. The next question is from the line of Sanketh Godha from Spark Capital. Please go ahead.
Sanketh Godha — Spark Capital — Analyst
Yeah. Thank you for the opportunity. Just have a question with respect to the third quarter results on the reserve release, INR100 crores of reserve release has played a meaningful role in implementing the loss ratio from the previous quarter. Sir, just wanted to understand what is this really is about and how do we see, is it a sustainable number given we are provided in the first quarter and we expect this release to play out, even in fourth quarter? That’s my first question.
Nilesh Kambli — Chief Financial Officer
Yeah. So Sanketh, reserve claim outstanding plus IBNR reserve is a function of the claims ratio. As the claims have reduced and we keep on paying the claims. So it’s not that it’s gone out of the box. But claim outstanding has converted into claims paid. What remains is outstanding claims as of December 31, ’23. So as the claim ratio has seen an improvement, there is a corresponding improvement in the claim outstanding. In terms of IBNR, we still continue to maintain similar levels of IBNR, which we had in September 30, as well. So there is no release in IBNR at all.
Sanketh Godha — Spark Capital — Analyst
Okay. Sir, basically the reported claims experience has been better than what you’ve provided for the outstanding claims, that’s why the reserve release has happened, that’s way I should understand?
Nilesh Kambli — Chief Financial Officer
No. See claim outstanding as on September 30, is a function of the claims supporting that has happened for the month of September in earlier period. Though September 30 claims which were outstanding gets paid in October, November. And what remains as on December 31, is the claims which have reported in December. So that’s the kind of improvement that we’ve seen. As claims start getting paid, the outstanding claims keeps on reducing, the new claims keeps on adding. And since there is an improvement in the loss ratio, the overall claim outstanding has reduced.
Sanketh Godha — Spark Capital — Analyst
Okay. Got it. And the second question was basically if I see the number of claims settled at the network hospital, that number has meaningfully improved in nine months number, which is at 76% compared to the 65% is the number which was paid for 1H. So, do I need to attribute to that factor also, which has played a role in improvement in the loss ratio and this 76% number is sustainable going ahead on it?
Prakash Subbarayan — Managing Director
Certainly. Certainly. That’s a dual advantage, it helps at improving the loss ratio and also it gives a lot of immense satisfaction to our customers. So we are very keen to achieve customer satisfaction. So this actually gives us a dual advantage.
Sanketh Godha — Spark Capital — Analyst
Yeah. But sir, the 76% is compared to sudden improvement from 65% is sustainable, so which means predictably you are seeing more claims settling at your preferred hospital, and you get a claim size benefits or claims — lower claims severity benefit and therefore the loss ratio could be better going ahead?
Prakash Subbarayan — Managing Director
I agree with your views. I think, our efforts to have a constant engagement with service providers and hospital has yielded in a very, very beneficial support from our service provider and we are able to increase our cashless participation.
Sanketh Godha — Spark Capital — Analyst
Got it. Sir. And the last one, see, 25% price hike what you’re taking on the family FHO, see completely can’t be claims inflation but — or the hospital inflation. So large part — some portion of the 25% should trickle down into improvement in the loss ratio in FY ’24, as the book gets renewed. So if I want to break down, if you can give a waterfall, the 25% breakdown, how much is because of the hospital inflation and how much will result into the improvement in the loss ratio? Because anecdotally we don’t get a understanding from speaking to the hospital but there was a hospital inflation of 25% in the current year.
Prakash Subbarayan — Managing Director
See, I think your understanding on the price revision, your price revision is not done anticipating a medical inflation. A price revision is not done in anticipation, but it is based on experience. So based on our product experience we go in for a price revision, to achieve sustainable ICR for each and every product. And the price increases taken considering that it will be sustained for three years, it’s not every year that we take the price increase.
Sanketh Godha — Spark Capital — Analyst
Sir, that’s the point. The immediate benefits given you have taken on a price hike from three-year perspective. So that immediate benefit probably will be more in FY ’24 and it will trickle — it will taper down as we move — to say third year of the pricing?
Prakash Subbarayan — Managing Director
Yeah, Sanketh, this remains to be seen. We are going to update you and we appreciate your good wishes.
Sanketh Godha — Spark Capital — Analyst
Okay. And last one sir. So this is the last price hike or we can expect, I think around 8% of the portfolio in second quarter got repriced, today now it is 46%. So we are seeing a 57% book getting repriced. So can we expect another round to happen in other products or this is broadly what we are going to experience in large part for next two years?
Prakash Subbarayan — Managing Director
That will again depend on the ICR of the particular product. We only say that, we have a close analysis and watchful of every product. And when that ICR of a particular product crosses that threshold we will look into it.
Sanketh Godha — Spark Capital — Analyst
Okay, sir. And lastly data keeping question, if you can disclose loss ratios broken down into Group Health, Retail Health and maybe Personal Accident Cover?
Nilesh Kambli — Chief Financial Officer
See, that’s an annual exercise, which will happen on a quarterly or nine-month basis, that’s not available in the public domain.
Sanketh Godha — Spark Capital — Analyst
Okay, Nilesh. Perfect. Yeah. Okay.
Operator
Thank you. The next question is from the line of the Dipanjan Ghosh from Citi. Please go ahead.
Dipanjan Ghosh — Citi — Analyst
Hi, good evening. Just few questions from my side. First, if you can give the trends in the retention renewal ratio on the Medi Classic product, where you take a price hike somewhere around June, July? That was the first question. Second, we have asked many times in this call on the new business growth and it seems that at least for the third quarter specifically, there has been a decline at least based on my calculation. So just wanted to get some sense if there is something that I’m missing or is there some trend particularly out there?
Third, on the regulatory changes, in case you decide to venture into life insurance business or protection of some other product segments, would it be organic or inorganic in nature? And is there any capital raising plans out there, in case you have to take that route. And lastly on the agent productivity, it seems that on a Y-o-Y basis for nine months and 3Q, your productivity levels have been broadly flattish, while the vintage of the agency base continues to increase. So just wanted to get some color on what is happening around there?
Anand Roy — Managing Director
Nilesh, I didn’t get the question.
Nilesh Kambli — Chief Financial Officer
Medi Classic retention.
Anand Roy — Managing Director
Yeah. Okay. So first let me come to the Medi Classic retention. So after the price hike what we have taken, we have not seen any major drop in the retention. In fact, our retention continues to be good. And we are very confident that the price hike is being well accepted by the market and that’s being reflecting in the initial results. So I think that’s quite good. As far as our new business for the third quarter is concerned, we have a positive growth, we are not declaring those numbers, but we do have a significant positive growth in our new business for the third quarter. It’s not negative as mentioned by you. And the last point about agents’ productivity, what was the question again, can you please repeat?
Dipanjan Ghosh — Citi — Analyst
Yeah. So on the agent productivity, it seems to be broadly flat for some time, while the vintage of the agent base is growing. So just wanted to get some color on that.
Anand Roy — Managing Director
See agent productivity is a function of addition of new agents as well. We have been adding 80,000 to 1 lakh agents. So if you exclude the new agents that have got added, the productivity is improving. It’s a function of new versus old agents.
Dipanjan Ghosh — Citi — Analyst
Sure. And lastly on the regulatory change part, whether you want to venture into the life in case the composite license are allowed and will there be any capital deployment plans?
Anand Roy — Managing Director
So see few years ago, we had a product called Star Combi, where we had a term life health indemnity and personal accident built into one plan. And there was quite a decent acceptance of the product in the market, but we had a partnership with one of the life insurance companies at point of time. If regulations do allow we don’t mind evaluating that business again, because I think there is a need for that product in the market, but we will see as it goes and the capital requirement will not be a challenge for a company like Star, which is focused on sustainable profitable growth. I don’t think capital will be a challenge for us.
Dipanjan Ghosh — Citi — Analyst
Sure sir. Thank you and all the best.
Anand Roy — Managing Director
Thank you.
Operator
Thank you. The next question is from the line of Sahej Mittal from HDFC Securities. Please go ahead.
Sahej Mittal — HDFC Securities — Analyst
Hi, thanks for the follow-up. So sir, given that we’ll be taking a 25% price hike in FHO plan. We are taking it because we have seen some bad claims experience in this product line. But just understanding it fundamentally what makes us so confident that the new business growth in this product will not be affected, despite a 25% price hike, given that our pricing in family floater plans is more or less comparable to peers?
Anand Roy — Managing Director
See, first of all, let me clarify that the product experience has not been bad, you’re comparing last year loss ratios which was because of COVID and that’s why…
Sahej Mittal — HDFC Securities — Analyst
I was speaking this from what I heard that you take a price hike after. So on the basis of product level experiences or the claims ratio could you face not on an aggregate level but on the product level?
Anand Roy — Managing Director
Yes, you’re right. So that’s what we do. We take a price revision based on the product experience and which we have done for this FHO product. So as far as new business is concerned, we have done a detailed analysis of the markets of our competitors’ product pricing with a similar product offerings. And we are quite confident that we will be able to pass on this price increase in the market.
Sahej Mittal — HDFC Securities — Analyst
Right. I mean, 25% price hike seemed a large one for someone even in agent selling that policy in the market for him, but 25% price hike seem a big one so…
Nilesh Kambli — Chief Financial Officer
See, we are very cognizant of that, is 25% what we are talking about is an aggregate. So it ranges. It ranges based on the geography and based on the age group. So there are — it is not uniform for across the country.
Sahej Mittal — HDFC Securities — Analyst
Right. And one clarification on the retail growth aspirations. So for the next two years what kind of growth in the new business — so for the retail new business, should we assume? Can we expect maybe?
Anand Roy — Managing Director
See our aspiration, I have told you that we want to grow at 20% plus on the retail side, at least for the near future. And if you assume renewal retention to where it is right now, we should have the balance coming from new business. I think new business should also ideally grow at the same levels. That’s our expectation.
Sahej Mittal — HDFC Securities — Analyst
So of the 20%, 22%, given that large portion would be coming from price hike, is it fair to assume that 4% to 5% of this would be coming out of new business sold?
Anand Roy — Managing Director
No, definitely not, we would do much better than that. When I said that, we are hoping that our new business growth should be in mid-teens, if not better.
Sahej Mittal — HDFC Securities — Analyst
Got it. Thanks and all the best.
Operator
Thank you. The next question is from the line of Manish Gupta from Solidarity. Please go ahead.
Manish Gupta — Solidarity — Analyst
Sir, what I wanted to understand is, if you have one-third of the market of retail health, by definition would your loss ratios be higher than your peers because you have more mass market vis-a-vis then?
Nilesh Kambli — Chief Financial Officer
So it’s a function of two things, one is the maturity of the portfolio and the market share. So considering the maturity of the portfolio when you compare to peers like SAHI, we are slightly ahead of them, higher than in terms of the loss ratios, but based on our scale and type of operations it is in line with our internal expectations. And the important major is a combined ratio, where we have been giving a guidance of 93% to 95% and that is our target basically.
Manish Gupta — Solidarity — Analyst
So am I given to understand that our strategy is to grow at a certain rate, let’s say 18% to 20%. I’m just picking the 20% number as you said, 18% to 20%. So is the strategy that we will grow at 18% to 20% with 93% to 95% combined ratio? And if our peers have a lower combined ratio, that’s fine. Our strategy is balancing this growth with this combined ratio. Am I right in understanding that?
Prakash Subbarayan — Managing Director
Yeah, you are almost, right. But one thing we want to supplement here is, it is not just growth, it is a quality growth. So we don’t look into only the quantity, we look into quality growth. So we are confident that this quality growth should bring us more and more sustainable profit.
Manish Gupta — Solidarity — Analyst
So what is quality of growth sir, can you please elaborate?
Prakash Subbarayan — Managing Director
A proper underwriting done, it is not undertaking, it is underwriting the risk, accepting the risk and identifying a profit making channel, so these are like you know some of the elements of profitable growth.
Manish Gupta — Solidarity — Analyst
So profitable growth implies 93% to 95% combined ratio is that understanding right?
Nilesh Kambli — Chief Financial Officer
Yes. So if you look at the peers, none of the company are operating at this kind of combined ratio levels that we’re talking about.
Manish Gupta — Solidarity — Analyst
I’m not sure that’s correct sir, because if you look at care health then for H1 FY ’23, their combined ratio was 92%.
Nilesh Kambli — Chief Financial Officer
Okay. See care health still follows 50% accounting method. So it’s not comparable to that extent.
Manish Gupta — Solidarity — Analyst
But sir, if we were to compare your claims by NWP, will that be like-to-like comparison?
Nilesh Kambli — Chief Financial Officer
What we can do is, you know, we can take it offline.
Manish Gupta — Solidarity — Analyst
Okay. Sir, I have another one or two questions if I may. Your opex to GWP is 16%, so how much of that 16% would be fixed cost versus variable cost?
Nilesh Kambli — Chief Financial Officer
Around 50% is fixed and 50% is variable.
Manish Gupta — Solidarity — Analyst
Okay. And my third and last question, sir, was that in this family another participant had asked this question earlier in the call. I just wanted to reconfirm this, that the 25% price hike has this been approved by the regulator? Or is this — we file and the regulator will take a look at it later on? Or this has already been approved by the regulator?
Nilesh Kambli — Chief Financial Officer
Yeah. This has already been approved by the regulator, they we have looked at the various parameters and have approved the product. So they provide the UIM for the product identification number which we have received.
Manish Gupta — Solidarity — Analyst
Okay. And my last question, sir, was that when the regulator examines your business and say, you’ve got a product where your loss ratios are much higher, they allow you a price increase. But does the regulator ask you to give a discount or how does the regulator adjust for the price increase there, giving you on a loss-making product vis-a-vis a product where your loss ratios might be significantly lower? So would the regulator examine this thing byproduct or as a portfolio?
Prakash Subbarayan — Managing Director
By product. We look into the frequency, the severity, the loss pattern of every product and the rationale by — for which we are asking for a price hike. So the parameters are verified, rationale has been checked and the futures are also studied by the regulator to see that whether the product deserves to be priced.
Operator
Thank you, Mr. Gupta, we request to return to the queue for any follow-ups. We take the next question that is from the line of Anand from WhiteOak. Please go ahead.
Anand Bhavnani — WhiteOak — Analyst
Thank you for the opportunity. A couple of questions. One is, the — payments that we make to hospitals in the network for any particular procedure as compared to the PSU insurer and to — are we on the same foot or do we have to pay a higher or low — can you give us some color?
Prakash Subbarayan — Managing Director
See, the payment to the hospital, like you know, it depends on so many factors. The location of the hospital, the geography and [Indecipherable] and resident of the hospital and the types of diseases.
Anand Bhavnani — WhiteOak — Analyst
Same procedure, if in the same geography, same procedure for the same person. As a private insurer, do we have to pay more than a PSU insurer because there are four of these PSU insurers who have higher bargaining power? And maybe they might get lower rates. So I’m just trying to understand if bargaining power is higher than us?
Prakash Subbarayan — Managing Director
See there are lot of things which you need to understand when someone utilizes a claim. In health insurance policy it is cashless, make free at the point of delivery without any extra cost. So that is more important that the pricing arrangement. But we — has a very, I’d like to know the number one standalone health insurer today, we have a stronger pricing arrangement and a better relationship with the hospitals. And we are guaranteed that like to our customers we not only pay the claim, we also validates the need for an admission whether the necessary procedure is being done, be given free electronics second opinion to our customers. So our customers have a lot of value advantage. We had high algorithm and like we thought of promote wellness in them, we prevent, we try and see that how best we can prevent readmission rate and recurrence in our customers. So we offer more than what — like I don’t want to compare it to others, but I can soundly say that we offer more than reimbursing a claim.
Anand Bhavnani — WhiteOak — Analyst
Sure, sir. And the purpose of understanding this was, I was wondering whether our claims ratio can still fall further if there is some unutilized bargaining power with the hospitals available to us?
Prakash Subbarayan — Managing Director
So, it’s a continuous process. We continue to negotiate our terms and conditions with the hospitals and take the benefit of pricing, based on our scale of operations.
Anand Bhavnani — WhiteOak — Analyst
Sure. And sir my second question was on claims by customer categories. Have you done any internal analysis on whether people who had contacted COVID, are they seeing any higher claims on any medical procedures or any particular illness? Is there any data for you to consider patients who have COVID infection to be more — having higher claims than others?
Prakash Subbarayan — Managing Director
COVID as a disease, there are lot of studies to look at the post-COVID complications, be it lung-related or blood vessel vascular complications. And like, you know, in our experience, we only see this admission due to respiratory infection. Those seeking the help of a pulmonologist. Those admission due to respiratory infections we see a small increase post the COVID. But how many people are exposed to COVID in India, given that, like you know, they might have got exposed through infection or through immunization, or through communal immunity. So there are multiple factors by which someone would have got exposed to the virus. But in our experience we don’t see any alarming post-COVID related admissions. But overall there may be a small increase in the number of admissions related to respiratory problems.
Anand Bhavnani — WhiteOak — Analyst
Sure. Thank you sir.
Operator
Thank you. The next question is from the line of Bhavin Pande from TrustPlutus Wealth. Please go ahead.
Bhavin Pande — TrustPlutus Wealth — Analyst
Yeah. Thanks for the opportunity. Just a couple of short questions. Firstly, I just missed out on claims ratio guidance in the introductory remarks. And secondly what sort of distribution mix are we looking at over five year period as to the north of 80% of our distribution happens by our agent partners? That’s it.
Prakash Subbarayan — Managing Director
Distribution mix?
Bhavin Pande — TrustPlutus Wealth — Analyst
Hello?
Prakash Subbarayan — Managing Director
It’s going to be technology guided. Our distribution mix going forward is going to be more technology aided. We are going to bet more on digital means in our procuring business. So towards that direction we have invested a lot of time and money and manpower. And we are very confident that we’re going to have a huge business either directly or through our web sales and through our digital sales.
Bhavin Pande — TrustPlutus Wealth — Analyst
But sir, are we looking at any sort of break up that you can give us in terms of numbers and channels?
Anand Roy — Managing Director
See, the distribution strategy for the next five years, if you may ask, which you’re asking is, there are areas of improvement, which we have identified, which we believe will be our focus area, which one is our partnerships and bancassurance business. Today that contributes to around 10% of our new business, which we believe should go up to at least 20% — 25% going forward. The opportunity is there. Now the regulations are also enabling to that.
The second piece is the digital business. Our digital business is also growing rapidly. It’s also contributing upwards of 10% of our new business as we speak. So we would like to take that also to the levels of 20%, 25% in the next five years’ time. So yes, the business mix would largely migrate towards a more wholesome distribution strategy where agency continues to be the mainstay of the business. But the other channels like Banca partnerships, digital and other ecosystem players on the digital side will contribute more.
Bhavin Pande — TrustPlutus Wealth — Analyst
Okay. And sir the claims ratio guidance number, I missed out on the opening remarks.
Anand Roy — Managing Director
So claims ratio guidance, there was a commitment made by Dr. Prakash that we reiterate our claims ratio guidance, since we’ve completed 10 months and we maintain the guidance of 63% to 65%.
Bhavin Pande — TrustPlutus Wealth — Analyst
Okay, sir. That helps. Thank you so much.
Operator
Thank you. [Operator Instructions] The next question is from the line of Anirudh Shetty from Solidarity Investment Managers. Please go ahead.
Anirudh Shetty — Solidarity Investment Managers — Analyst
Hi, thanks for taking my questions. I had two of them. Sir, my first question was on, just wanted to understand how the structure of the combined ratio work? So if we’re at say 63% to 65% target claims ratio and our combined ratio was 93% to 95%, it basically means opex ratio is about 30%, which is roughly where we are today. But given we have say about 78% of our premium has fixed cost, shouldn’t we see operating leverage on these costs over time? And so over time can the combined ratio which is 93% to 95% today, actually go lower as we benefit from this? Or is there a possibility that the loss ratios could also go up over time as you know in this business as a customer vintage increases the loss ratios tend to increase as well. So how do we see — look at the combined ratio and the loss ratio is evolving over time for our business?
Nilesh Kambli — Chief Financial Officer
See what happens is over a period of time there will be efficiencies that will come in the expense ratio, but we’ll continue to invest in our business in terms of the digital, in terms of technology, in terms of refurbishment of our infrastructure. So that will ensure that, while we keep on reducing the cost and take benefits of the scale, it should remain in that range or slightly lower than that. Same thing for the loss ratio as well. As we take the price increase the loss ratio will decrease then across other products there’ll be inclination which will come through. So that is why we are saying, we will continue to operate in 63% to 65% range. Whenever we take a price increase, which is coming through in the next 12 to 18 months in terms of the earned premium, the loss ratio will tend to be at the lower end. It will increase and remain in that range over a medium to short — medium to long period of time.
Anirudh Shetty — Solidarity Investment Managers — Analyst
Got it. Got it. And my next question was more on the — so I wanted to ask about whether we would consider doing life insurance as we allowed to do it. And I know you had mentioned that, this is something you’re evaluating. But my question was more on how do you guys think about your right to win in that category? Because at this point in time there are multiple players who are there already. And from our strength point of view, whether it’s our distribution channel, our brand and also our ability to price the risk, because the risk was also very different. So how do you think Star would be positioned if actually decided to get into term protection manufacturing?
Prakash Subbarayan — Managing Director
Our brand image, our agency strength and our distribution reach and scale across the country, our presence across the country. So we have lot of things to our advantage and this can complement to our existing portfolio. We are very confident. And we are in the habit of creating benchmark in the industry. There are lot of people doing health, we started and we know we are dominant player today. So meaning that, we are very confident about what we’re doing with our scale presence and reach. Any of these things could only complement to our existing portfolios and we are bound to grow more and more.
Anirudh Shetty — Solidarity Investment Managers — Analyst
Okay. And as approach do you all — typically what we noticed is in any industry the top players tend to kind of dominate market share in the profit pool over time. So when you all think about entering into any new category do you all — will you all only do it if you all see a road map to you all becoming a leader? Or will also enter to categories that you think it could be synergistic and the customer might appreciate you all having those products as well? Like how do you guys think about it?
Anand Roy — Managing Director
We’ll see the strategy, and the strategy will always be to build a sustainable model, which is also profitable. Okay? So we’re not going to be in business for the sake of being in business. But the fact of the matter is, there are opportunities, which is coming up and we’re evaluating as we speak. So other lines of business being one, but there is also opportunities in various adjacencies to our own — core business of health, in terms of how we can provide more value-added services. Is there any measures to monetize those things.
We are working on all of these areas and we hope that given as Dr. Prakash mentioned, the size and scale and the brand and the trust that we have earned in the market over the last 15 years. I think there are opportunities for us to leverage all of this and grow the business. And you will imagine, you will understand also that in the insurance business, the health is the toughest business to be in. Okay? And we have overcome that milestone to some extent where we speak. And for us to get into other lines of business is relatively simpler as compared to somebody else trying to get into health and establish a presence there. So we’ll see how it pans out, but this is what we are thinking about right now.
Anirudh Shetty — Solidarity Investment Managers — Analyst
Got it. Thank you for answering my questions.
Operator
Thank you. [Operator Instructions] The next question is from the line of Pankaj Murarka from Renaissance. Please go ahead.
Pankaj Murarka — Renaissance — Analyst
Yeah. There have been lot of these questions on price hike. I just want to understand what will this price hike do to your market share? Meaning, are we saying that the market share will remain around where it is even after the price hike or does it change things?
Prakash Subbarayan — Managing Director
Well, I think I should clarify the larger crowd here. So the price hike is not the first time we’re doing. We are 16 years in the market. And for the particular project, FHO, we are doing the second price hike in the six years. And you know this will take at least two years for us to become fully alive and rolling, for us to see the benefits. To be very — fully active it may take another close 18 month to 24 months. And the price hike also is at a range of 8 to 10 at the lowest, 236 to 238 is the highest. It depends on the geography, it depends on the individual and age.
There are so many factors. So I just want to clear this, and I hope every one of us can understand price hike is something which we regularly do. We are in the habit of setting the loss of a product on a product-to-product basis. And whenever there is a need we pitch-in and we do a price hike. We always work towards as my colleague was talking about, sustainable profit and growth. If we have to work towards that we work on every unit, every fundamental unit that can help us to achieve that sustainable profit, we worked on it. And one of them is price hike for a product.
Pankaj Murarka — Renaissance — Analyst
I get your point, sir, that your distribution is heterogeneous and your customer set is also — subset is heterogeneous and it’s not homogeneous. My question still remains, that once this price hike is absorbed over the next 18 months as you said, where do you see your market share? One. And second, a related question is, meaning or since you’ve been around in business for long but publicly listed for a brief while, are we seeing that this industry’s pricing power where you can raise prices at least linked to inflation or what’s the long-term price inflation in pricing for a like-to-like product that this industry sees over medium-term to long-term? If you can share some insights on that, that will be helpful.
Prakash Subbarayan — Managing Director
I don’t see any correlation between market share and price increase, irrespective of these price increase we are bound to hold the largest market share. And as Mr. Anand Roy was pointing out in his deliberation that every year we are only increasing our market share. So irrespective of this, we are confident of increasing our market share because we have multiple strategies to like infiltrate and enhance our penetration.
Pankaj Murarka — Renaissance — Analyst
Okay. Can I ask one related question? On a like-to-like basis where do you stand in your assessment in terms of industry pricing? Are you — for a comparable product are you the highest pricing or somewhere in the middle or where do you stand in the industry in terms of pricing?
Prakash Subbarayan — Managing Director
We are very carefully moderating this that you know like we maybe at the average or an inch less than the average also, because we don’t do premium loading on the product. We have one price for the product and know there is an easy guidance to the customer who approach it. And I cannot say that we are the costliest in the market. At the same time I cannot say that, our USP is the cheapest price. So we are like somewhere in between.
Pankaj Murarka — Renaissance — Analyst
And that is the positioning you want to maintain?
Prakash Subbarayan — Managing Director
Certainly.
Pankaj Murarka — Renaissance — Analyst
Because when’re you saying that market share is immune to pricing, there is some disconnect, which I’m not able to appreciate. That is saying that, markets will not been influenced by pricing, so I understand what you’re trying to say is influenced by other factors, including servicing, turnaround times and other things. But to say that it’s completely immune to pricing, meaning is that what you would say?
Anand Roy — Managing Director
No, servicing the policy, achieving the customer satisfaction, maintaining a good relationship with the hospitals, all these things are going to enhance our penetration. We Star Health Insurance as a brand is dominant today because of our efficiency and servicing. It is a servicing of our customers which has given us this brand image. So we continue to do that. And particularly when it comes to your price division, we take into consideration, our customers like needs and requirement. And accordingly, we do all these things. Because we have room, we want to take our customers along with us. It is not that — so we are very cognizant of retaining our renewal retention and at the same time growing our fresh business subsequent to this revision that we have done in one of our products. And it helps as you all know, it is not a commodity product, it is an engagement product. The way we have been constantly engaging with the customer has brought us to this stage.
Operator
Thank you. The next question is from the line of Prayesh Jain from Motilal Oswal. Please go ahead.
Prayesh Jain — Motilal Oswal — Analyst
Yeah. Hi. Sorry to hop of this price hike again, but just thinking aloud, is it fair to us or could you just highlight whether if the cohorts would that we’re operating in today in that product that would have — that remains the same next year? And the price hike is implemented, your total premium Family Health Optima will grow at 25% or based on cohorts the growth could be different?
Anand Roy — Managing Director
In the recent past we have also introduced other products like Health Assure and Women Care. And we are — those products are also doing very well in the market. So like every year with the introduction of a new product, particularly a product with a lot of innovative and new features. For example, we have introduced a product where we are giving day one cover to the new born.
Prayesh Jain — Motilal Oswal — Analyst
Dr. Prakash, I think you spoke specifically…
Anand Roy — Managing Director
So I think we are one of the insurance companies to give a cover for a baby born from day one. So every product has got some attractive new features. And when there are new products introduced, naturally there will be some fresh customers attracted to that product.
Prayesh Jain — Motilal Oswal — Analyst
My question is very specific to Family Health Optima cohorts. So if you have the current cohorts whatever — who have Family Health Optima products. And you implement the price hike, would you see a 25% growth in that Family Health Optima premium for next year?
Nilesh Kambli — Chief Financial Officer
So see technically what you’re asking is right. If the same cohorts remain there should be a 25% price hike across the Board. It will take as my colleagues have mentioned around 12 to — around 18 months to 24 months for the whole thing to play out. But we have seen in the past that in case there are certain cohorts of customers who may want to shift to probably some of the 1% or 2%, there are dropouts from this product line. So exactly I cannot commit, that there will be 25% price hike in the overall portfolio, but around that range is what I think we should be able to achieve.
Prayesh Jain — Motilal Oswal — Analyst
Just extending that point, so it fair to assume that when you mentioned that the price hike ranges from anywhere between 13% to 36%, that kind of 36%, 40% kind of range. Is it fair to assume that the higher end is towards more cohorts where you — either way — kind of want to exit and reduce that share price to possibly a senior citizen or higher age — not the senior citizen, in the higher age bracket or geographies where you have a relatively higher loss ratio experience?
Nilesh Kambli — Chief Financial Officer
So to a large extent your question is correct. Unfortunately the regulations do not allow us to price based on age-wise cohorts, repriced them. So we have done some geographical realignment of our — the cities that we operate in and some of the higher loss making, I mean, higher ICR cities have been brought into the higher price bucket, if you may say so. But that’s the alignment which we have done.
Prayesh Jain — Motilal Oswal — Analyst
Got that. And last bit, in case the — whenever the risk based solvency is implemented, what kind of solvency we would — we gain from it?
Nilesh Kambli — Chief Financial Officer
See what happens is, when it comes to risk based solvency, all the factors are considered in terms of the investment portfolio, the reinsurance receivables, which we don’t have any, because we don’t have reinsurance, the claim outstanding, the business model. We had done some rough workings, which is a Singapore risk-based solvency. And we see that, for us it is more than two times the required level. And what happens is, in today’s scenario, as you keep on growing, because it is premium factor based. Your solvency dropped by a certain level. And we have indicated that it can drop by 8 basis points to 10 basis points every year. But when it comes to risk-based solvency, since it’s balance sheet method, there is no pressure on solvency as we keep on growing the business. So it’s more sustainable in terms of the capital requirement.
Prayesh Jain — Motilal Oswal — Analyst
Great. Thank you so much.
Operator
Thank you. Ladies and gentlemen, that would be our last question for today. I now hand the conference over to Mr. Nilesh Kambli for closing comments. Thank you, and over to you.
Nilesh Kambli — Chief Financial Officer
Thank you, everyone, for joining the call. As spoken on the call, we are focused on sustainable profitable growth, and we are taking all the decisions to achieve that goal. And thanks once again for joining the call. Thank you very much.
Operator
Thank you very much.
Anand Roy — Managing Director
Thank you.
Operator
[Operator Closing Remarks]