Nomura flags higher cost-reset pressure for Niva Bupa and Star Health under IRDAI proposals
Nomura estimates proposed IRDAI expense-of-management limits would require a 15.2 percentage-point reduction for Niva Bupa and 12.3 points for Star Health, versus 0.6 points for SBI Life over the specified transition periods.
The development
Nomura estimates SBI Life needs a 0.6 percentage-point EOM reduction over five years under IRDAI’s proposed rules, versus 15.2 percentage points for Niva Bupa and 12.3 percentage points for Star Health.
The numbers
- 10.6%
- FY26
- 0.6 percentage point
- five years
- 15%
- FY26 to FY29F
- FY26-29F
- 25%-20%
- two and five years
- 35.2%
- 15.2 percentage-point
- 9.1 percentage points
- 6.2 percentage points
- 99%
- FY29E
- 2Q27F
- 23%
- 30%
- 32.3%
- 12.3 percentage-point
- 2.9 percentage points
- 9.4 percentage points
- 16%
Why it matters to operators and investors
The proposed rules could spur demand for distribution, technology and operating-model partnerships that help health insurers cut acquisition and servicing costs quickly.
What to watch next
- Final IRDAI notification, including transition timelines, expense definitions, carve-outs and penalties for non-compliance.
- Quarterly expense ratios, commission expense trends and management guidance from Niva Bupa, Star Health and comparable health insurers.
- Changes in health-insurance premium rates, product discounts, co-pay terms and distribution incentives.
- New-business premium growth versus renewal premium growth, especially through agents, brokers and bancassurance channels.
- Distributor attrition, channel-mix shifts and customer acquisition cost trends.
- Whether SBI Life's relatively small required reduction translates into pricing flexibility or incremental distribution investment.
- Accelerate zero-based cost reviews across commissions, employee costs, advertising, technology vendors and branch operations.
- Re-negotiate distributor and broker payout structures toward persistency, claims quality and renewal-linked incentives rather than upfront acquisition commissions.
- Increase digital direct-to-consumer acquisition, self-service servicing and automated underwriting to lower cost per policy.
- Reprice health products selectively, tighten discounting and redesign benefits to protect underwriting margins if distribution costs cannot be fully reduced.
- Prioritize renewal retention and cross-sell because renewal books carry lower acquisition costs than new-business growth.
- Consider scale-building partnerships, shared-service arrangements or consolidation if fixed-cost absorption becomes a competitive advantage.
The counter-case
The headline may overstate the near-term earnings risk: proposed expense-of-management caps are not necessarily final, may include transition relief or permitted offsets, and insurers can partly respond through commission redesign, digital distribution, productivity gains, premium repricing, and product-mix changes. A large percentage-point 'required reduction' also does not automatically translate into an equivalent profit hit, especially if the baseline expense ratios, growth rates, and accounting treatments differ.