The Indian insurance sector has been opened up to the private sector for more than a year now with the passage of the Insurance Regulatory Act early last year. The Indian government has thus allowed both Indian and foreign private insurance companies to get into this presumably highly lucrative business segment. Quite a few insurance majors like Royal and Sun Alliance, Standard Life, Sun Life, Canada Life, Aetna Corporation, Cigna Corporation and Bhupa Inc. have been since then closely looking at life and non-life markets in India. While some of them have already shown interest in life insurance, no company has made any serious move to start operations in the healthcare sector. It is a fact that a MoU was signed by Cigna with Ranbaxy Laboratories and a partnership agreement was signed by BUPA with Piramal Enterprises for healthcare policies. Yet, the companies are hesitating to take the plunge. This needs to be looked into considering the fact that the country has a 300 million strong middle class population and the only player in the market now is the state owned The General Insurance Company. And GIC has been able to tap only a fraction of this large market so far with a total sale of 2.5 million Mediclaim policies so far. According to an estimate, health insurance business is projected to be a whopping Rs17,000 crore by the year 2005 in this country. With the public hospitals and healthcare facilities in most parts of the country in a deplorable state, entry of private players with competitive rates of premium should also be a blessing. But the insurance companies are a bit nervous to get into this market on account of two reasons. First is the IRA stipulation of a minimum paid up capital of Rs.100 crore for setting up an insurance business. While it is important to have a large equity stipulation for a business like this, insurance companies feel that an equity base above Rs.30 crore would be unviable. Secondly, the immorality profile of an average Indian definitely makes the insurance companies think twice before getting into this business. The practice of fake prescriptions, hospitalisation bills, medicine bills, etc. is widely prevalent in this country today. Probably, the insurance companies could find certain ways to tackle such practices in future, but the policy support from the government is most crucial. Healthcare insurance should not be seen as just another non-life sector as it requires a lot of domain expertise. If given proper direction, health insurers should be able to reform the entire healthcare system of the country. It is important, therefore, to frame a set of new rules for health insurance even incorporating certain special concessions without any further delay.