Insurance Industry in India
Content
INSURANCE INDUSTRY IN INDIA
AGENDA
Insurance Defined Principles of Insurance Evolution of Indian Insurance Industry Insurance Sector Reforms Insurance Regulatory and Development Authority Advantage India Market Structure Overview of Life Insurance Segment Overview of Non-Life Insurance Segment Growth Drivers Key Trends and Players Policy and Regulatory Framework Opportunities
Insurance Defined
A legal contract whereby one party called the insurer undertakes to pay a fixed amount of money on the happening of a particular event, which may be certain or uncertain. The other party called the insured pays in exchange a fixed sum called premium. Insurer : Assurer or Underwriter Insured : Assured By nature the contract is Synallagmatic as well as aleatory
Principles of Insurance The basic principles of an insurance contract are:1) Principle of ‘uberrima fides’ or principle of utmost good faith 2) Principle of indemnity 3) Principle of subrogation
4) Principle of causa proxima 5) Principle of insurable interest
Evolution of Indian Insurance In 1818 Oriental Insurance Company was formed in Kolkata. The new era Industry began with the passing of Life Insurance Act of 1912. Ancient Historical Time : Insurance in India can be traced back to the Vedas. The Sanskrit term ‘Yogakshema’ (meaning well being), the name of Life Insurance Corporation of India’s corporate headquarters, is found in Rig Veda. British-India Period : Bombay Mutual Life Assurance Society indicated the birth of first Indian life insurance company in the year 1870. Post Independence Era of Indian Insurance : Nationalization was accomplished in two stages; initially the management of the companies was taken over by means of an Ordinance, and later, the ownership too was taken by means of a comprehensive bill. Nationalisation Phase of Indian Insurance : 1. In 1944 a bill to amend the Life Insurance Act 1938 was introduced in the Legislative Assembly. 2. In 1956,154 Indian insurance companies, 16 non-Indian companies and 75 provident societies were taken over by the central government and nationalised. LIC formed by an Act of Parliament, viz. LIC Act, 1956. 3. In 1972, the General Insurance Business (Nationalisation) Act, which nationalised the general insurance business in India with effect from 1st
Continue…… Liberalization of Indian Insurance : 1. In 1994, Insurance sector invited private participation to induce a spirit of competition amongst the various insurers and to provide a choice to the consumers. 2. In 1997, IRDA was set up. In the first year of insurance market liberalization (2001) as much as 16 private sector companies including joint ventures with leading foreign insurance companies have entered the Indian insurance sector. Of this, 10 were under the life insurance category and six under general insurance. Indian Insurance in 21st Century : 1. In 2000, IRDA starts giving licenses to private insurers namely, ICICI prudential and HDFC Standard Life insurance first private insurers to sell a policy. 2. In 2001, Royal Sundaram Alliance first non life insurer to sell a policy 3. In 2002, Banks allowed selling insurance plans. As TPAs enter the scene, insurers start setting non-life claims in the cashless mode. 4. In 2007, First Online Insurance portal, www.insurancemall.in set up by an Indian Insurance Broker, Bonsai Insurance Broking Pvt. Ltd.
Insurance Sector Reforms The formation of Malhotra Committee in 1993- headed by former Finance Secretary and RBI Governor R.N. Malhotra initiated reforms in Indian insurance industry. The aim of Malhotra committee was to assess the functionality of the Indian insurance sector. In 1994, the committee submitted the report and some of the key recommendations included: 1. Structure 2. Competition 3. Regulatory Body 4. Investments 5. Customer Service Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in Parliament in December 1999. The IRDA since its incorporation as a statutory body in April 2000 has fastidiously stuck to its schedule of framing regulations and registering the private sector insurance companies.
The LIC (Amendment) Bill 2009 1. LIC (Amendment) Bill 2009 aims to increase the equity of LIC from Rs.5 crores to Rs.100 crores. 2. The LIC (Amendment) Bill 2009 also contains another amendment to provide sovereign guarantee on a selective basis, instead of the absolute guarantee provided all these years.
Advantage India India is among the world's youngest nations, with a median age of 25 years as compared to 43 in Japan and 36 in the US. This, coupled with the increasing disposable income and growing demand for personal financial security indicate a promising future for the insurance industry. Premium income as a percentage of GDP has increased from 3.3 per cent in 2002–03 to 7.6 per cent in 2008– 09 Expansion in the insurance industry has necessitated specialized risk management, business continuity planning and asset liability management.
Risk managemen t for strategic advantage
Young consumer segment with increasing disposable income
Wide range of insurance products available
Advantage India Mode of employme nt
Mode of infrastructural development Rising contribution to GDP
Insurance companies are providing a wide range of products to meet the diverse requirements of the Indian population. According to the Eleventh Five Year Plan (2007–2012), the infrastructure sector requires an investment of US$ 428.4 billion. In 2008–09, the insurance industry contributed US$ 15.7 billion to infrastructure funding.
Market Structure Ministry of Finance (Government of India)
Insurance Regulatory and Development Authority (IRDA)
Life insurance (23)
Public (1)
Private (22)
Non-life insurance (22)
Public (7)
Private (15)
Overview of Life Insurance Segment Premium income has grown at a high CAGR of 25.8 per cent between 2002–03 and 2008–09. •The number of policies issued grew at a CAGR of 12.3 per cent. between 2002–03 and 2008–09. •There are 23 players, 1 from the public sector and 22 from the private sector, as of January 2010. •There is increased insurance penetration due to a growing consumer class, rising insurance awareness and increasing domestic savings and investments. A wide range of life insurance products are available. These include: •Group insurance products —endowments, term insurance, annuities, whole life insurance, riders •Individual insurance products —Unit Linked Insurance Plans (ULIPs), pension funds, guaranteed life products
Overview of Non-Life Insurance Segment Premium income grew at a CAGR of 17.6 per cent between 2002–03 and 2008–09. There are 22 players, out of which 7 are public sector players (including 1 reinsurer) and 15 private sector players, as of January 2010. Segments covered include auto, health, fire, marine and engineering, among others.
Product trends: Auto insurance had the largest share in the non-life insurance segment in 2008–09 (43.2 per cent). Health segment recorded a growth of 21.3 per cent in 2008–09 (a growth of 9.3 per cent over 2005–06). Public sector companies have a dominant share in the marine insurance segment.
Growth drivers There is a high demand for insurance products due to a growing middle class, increasing working population, rising household savings and increasing purchasing power. Penetration levels set to increase •The increasing literacy rate, specially in rural India, has spread awareness about the need for insurance. •Between 2006 and 2026, the working population (25–60 years) is expected to increase from 675.8 million to 795.5 million giving rise to a favourable market for insurance companies.
•Projected per capita GDP is expected to increase from US$ 380.8 in 2000– 2001 to US$ 2,097.5 in 2026, reflecting higher disposable income. •Favourable government and regulatory initiatives are expected to increase the contribution of the insurance industry to the overall economic development of the country.
Continue….. Fast progressing medical technology and increasing demand for better healthcare has resulted in rising demand for health insurance. Regulatory initiatives to promote health insurance include: •IRDA has set up a separate department for health insurance. •It has recommended that the government brings down capital requirements for standalone health insurance companies to US$ 10.42 million from US$ 20.83 million. •The government is set to raise budgetary support of US$ 28.33 billion for the health sector during the Eleventh Plan. •International players and life insurers have entered this segment. Launch of innovative products •The life insurance sector has witnessed the launch of innovative products such as ULIPs. Other traditional products have also been customised to meet specific needs of Indian consumers. •The non-life insurance sector has witnessed personal/retail line products pick up on the back of increasing income levels and changing life styles. •Emergence of new distribution channels, such as bancassurance, brokers and echannels, has increased outreach. •Rise in sale of passenger cars, fuelling demand for auto insurance •Between 2002–03 and 2008–09, the number of passenger cars has increased at a CAGR of 14 per cent. This trend is likely to continue due to strong growth in the auto segment resulting from an increase in consumer income levels. Between 2005–06 and
Key Trends and Key Players Emergence of new distribution channels Product innovation Growing market share of private players
• Alternative channels include bancassurance, direct selling agents, brokers, online distribution, corporate agents such as non-banking financial companies (NBFCs) and tie-ups of para-banking companies with local corporate agencies (e.g. NGOs) in remote area.
• Consumers’ need for higher levels of customisation has led to product innovation. • Product innovation will continue to enhance operational efficiency.
• In the life insurance segment, share of the private sector in total premiums increased from 2 per cent in 2002–03 to 29.1 per cent in 2008–09. • In the non-life insurance segment, share of the private sector in total premiums increased from 9.5 per cent in 2002–03 to 41.1 per cent in 2008–09.
Key Players - Life Insurance Company
Indian promoter partner(s) LIC Government of India ICICI Prudential ICICI Bank Ltd Bajaj Allianz Bajaj Auto SBI Life SBI HDFC Standard Life HDFC Birla Sun Life Aditya Birla Group Reliance Reliance Group Max New York Max, India Tata AIG Tata Group Aviva Dabur OM Kotak Life Kotak Mahindra Bank Metlife Jammu & Kashmir Bank, Shapoorji Pallonji, Max ING Vysya Gujarat Ambuja, Enam, Exide Shriram Life Shriram Group Sahara Sahara Group Bharti AXA Bharti Group IDBI Fortis Life IDBI, Federal Bank Future Generali Future Group Canara HSBC OBC Canara Bank, OBC AEGON Religare Religare Star Union Dai-ichi Bank of India, Union Bank of India IndiaFirst Life Insurance Bank of Baroda and Company Andhra Bank
Foreign partner(s)
Market share (2008–09) (in per cent) None 70.92 Prudential, UK 6.92 Allianz, Germany 4.79 BNP Paribas, France 3.25 Standard Life, UK 2.51 Sunlife, Canada 2.06 None 2.22 New York Life, USA 1.74 AIG, USA 1.24 CGU Life, UK 0.90 Old Mutual, South Africa 1.06 Metlife, USA 0.90 ING Insurance, Netherlands Sanlam, South Africa None AXA Insurance, France Fortis, UK Generali Group, Italy HSBC, Asia Pacific AEGON, USA Dai-ichi, Japan
0.65 0.20 0.09 0.16 0.14 0.07 0.13 0.01 0.02
Legal & General Middle 0.00 East Limited, UK
Key Players – Non-Life Insurance
Company
New India Assurance National Insurance United India Insurance Oriental Insurance ICICI Lombard Bajaj Allianz Reliance IFFCO Tokio Tata-AIG Royal Sundaram Cholamandalam HDFC ERGO General Future Generali Shriram General Universal Sompo
Indian promoter partner(s) Government of India Government of India Government of India Government of India ICICI Bank Bajaj Group Reliance Group IFFCO Tata Group Sundaram Finance & Associates Murugappa Group HDFC Future Group Shriram Group
Allahabad Bank, IOB, Karnataka Bank Bharti AXA Bharti Group Raheja QBE Raheja Group GIC (Re-insurer) Government of India Health insurance Indian promoter partner(s) Star Health & Allied Star Health and Allied Insurance Insurance Co Apollo DKV Apollo Hospitals Agriculture Insurance Co GIC and its four
Foreign partner(s)
None None None None Lombard, Canada Allianz, Germany None Tokio Marine Asia AIG,USA Royal & SunAlliance Plc,
Market share (2008–09) (in per cent) 18.03 13.98 13.97 12.94 11.18 8.63 6.26 4.95 2.89 2.63
Mitsui Sumitomo, Japan ERGO, Germany Generali Group, Italy Sanlam Group, South Africa Sompo, Japan
2.24 1.11 0.64 0.37
AXA Insurance, France QBE Holdings, Australia None Foreign partner(s)
0.09 0.00 Market share (2008–09) (in per cent) 1.67
ETA Ascon Group, Oman DKV, Germany None
0.10
0.16 2.63
Insurance Regulatory and Development Authority (IRDA) IRDA was constituted as an autonomous body to regulate and develop the business of insurance and reinsurance in India. The authority was constituted on 19 April 2000; vide Government of India’s notification no. 277. Role of IRDA 1. Regulatory: It frame and issue statutory and regulatory stipulation, guidelines and clarification. 2. Developmental and Promotional: The developmental and promotional role includes facilitating the growth of the market by attracting a large number of players.
Objectives of IRDA 1. Policy holder protection 2. Healthy growth of the insurance market
Policy and Regulatory Framework
A company, to operate as an insurance company in India, must be incorporated under the Companies Act, 1956, and possess the certificate of the memorandum of association and articles of association.
Capital requirement —paid up capital for life and non-life insurance is Rs 100 crore and for reinsurance is Rs. 200 crore.
At least US$ 416.7 million for reinsurance business
International players can operate in India only through a joint venture with a domestic firm and are classified under private sector insurers.
FDI up to 26 per cent is permitted in the insurance sector.
IRDA does not allow foreign reinsurance companies to open branches in India. This proposal is currently under consideration in the Parliament. IRDA and the Securities and Exchange Board of India (SEBI) are in the process of finalising their directives and provide detailed guidelines for M&A.09 FDI norms : The Insurance Laws (Amendment) Bill, 2008, proposes to provide for the increase in shareholdings by a foreign company from the current limit of 26 per cent to 49 per cent. Disclosure norms : IRDA is drafting norms for mandatory disclosure of insurers’ financial statements, investment portfolios at regular intervals, financial and operating ratios, actual solvency margin, policy-lapse ratio, current financial position, risk management architecture, etc. Set up a data warehouse to monitor settlement of insurance claims. Publishing policy and draft documents in regional languages for better understanding and extending reach.
Opportunities High potential demand for insurance products •Since more than two-thirds of India’s population lives in rural areas, microinsurance is seen as the most suitable aid to reach the poor and sociallydisadvantaged sections of society. •Favorable demographics, fast progression of medical technology and increasing demand for better healthcare have facilitated a high growth in health insurance. Growing demand for Indian insurance off shoring business •Total revenues from Indian offshore insurance business process outsourcing (BPO) services are estimated to have increased from US$ 367 million in 2002–03, US$ 790 million in 2006–07 to US$ 2 billion by 2009–2010. •Employment is expected to more than double from 41,600 in 2005–06 to around 100,500 in 2009–2010. •Lower penetration of the health insurance sector •In India, the total expenditure on health, as a percentage of GDP, was 5 per cent in 2006–07 as against15.2 per cent in the US, 8.2 per cent in the UK and 4.7 per cent in China. Of this, government expenditure constituted 3.5 per cent. •The health insurance industry has the potential to become a US$ 5.21 billion industry by 2012. •Life insurance companies are likely to target primarily the young population so
Continue…. Growing pension sector •In India, the government provides limited social security to its citizens as reflected in the fact that less than 4 per cent of the population is covered under the social security schemes. Only government employees are entitled to pension benefits post-retirement. •The opening of the pension sector and the establishment of the new pension regulator have expanded the avenues for private sector employees. Rising demand from semi-urban and rural population for micro-insurance products •The industry is also promoting micro-insurance as a viable business opportunity and integrating the same with the poverty alleviation programmes of various state governments. •Poor insurance literacy and awareness, high transaction costs, inadequate regulations and inadequate understanding of client needs and expectations have restricted demand for micro-insurance products. •However, with the development of rural health insurance regulations and growing awareness about micro-insurance products, focus of many private players has shifted to these areas.
THANKS
AGENDA
Insurance Defined Principles of Insurance Evolution of Indian Insurance Industry Insurance Sector Reforms Insurance Regulatory and Development Authority Advantage India Market Structure Overview of Life Insurance Segment Overview of Non-Life Insurance Segment Growth Drivers Key Trends and Players Policy and Regulatory Framework Opportunities
Insurance Defined
A legal contract whereby one party called the insurer undertakes to pay a fixed amount of money on the happening of a particular event, which may be certain or uncertain. The other party called the insured pays in exchange a fixed sum called premium. Insurer : Assurer or Underwriter Insured : Assured By nature the contract is Synallagmatic as well as aleatory
Principles of Insurance The basic principles of an insurance contract are:1) Principle of ‘uberrima fides’ or principle of utmost good faith 2) Principle of indemnity 3) Principle of subrogation
4) Principle of causa proxima 5) Principle of insurable interest
Evolution of Indian Insurance In 1818 Oriental Insurance Company was formed in Kolkata. The new era Industry began with the passing of Life Insurance Act of 1912. Ancient Historical Time : Insurance in India can be traced back to the Vedas. The Sanskrit term ‘Yogakshema’ (meaning well being), the name of Life Insurance Corporation of India’s corporate headquarters, is found in Rig Veda. British-India Period : Bombay Mutual Life Assurance Society indicated the birth of first Indian life insurance company in the year 1870. Post Independence Era of Indian Insurance : Nationalization was accomplished in two stages; initially the management of the companies was taken over by means of an Ordinance, and later, the ownership too was taken by means of a comprehensive bill. Nationalisation Phase of Indian Insurance : 1. In 1944 a bill to amend the Life Insurance Act 1938 was introduced in the Legislative Assembly. 2. In 1956,154 Indian insurance companies, 16 non-Indian companies and 75 provident societies were taken over by the central government and nationalised. LIC formed by an Act of Parliament, viz. LIC Act, 1956. 3. In 1972, the General Insurance Business (Nationalisation) Act, which nationalised the general insurance business in India with effect from 1st
Continue…… Liberalization of Indian Insurance : 1. In 1994, Insurance sector invited private participation to induce a spirit of competition amongst the various insurers and to provide a choice to the consumers. 2. In 1997, IRDA was set up. In the first year of insurance market liberalization (2001) as much as 16 private sector companies including joint ventures with leading foreign insurance companies have entered the Indian insurance sector. Of this, 10 were under the life insurance category and six under general insurance. Indian Insurance in 21st Century : 1. In 2000, IRDA starts giving licenses to private insurers namely, ICICI prudential and HDFC Standard Life insurance first private insurers to sell a policy. 2. In 2001, Royal Sundaram Alliance first non life insurer to sell a policy 3. In 2002, Banks allowed selling insurance plans. As TPAs enter the scene, insurers start setting non-life claims in the cashless mode. 4. In 2007, First Online Insurance portal, www.insurancemall.in set up by an Indian Insurance Broker, Bonsai Insurance Broking Pvt. Ltd.
Insurance Sector Reforms The formation of Malhotra Committee in 1993- headed by former Finance Secretary and RBI Governor R.N. Malhotra initiated reforms in Indian insurance industry. The aim of Malhotra committee was to assess the functionality of the Indian insurance sector. In 1994, the committee submitted the report and some of the key recommendations included: 1. Structure 2. Competition 3. Regulatory Body 4. Investments 5. Customer Service Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in Parliament in December 1999. The IRDA since its incorporation as a statutory body in April 2000 has fastidiously stuck to its schedule of framing regulations and registering the private sector insurance companies.
The LIC (Amendment) Bill 2009 1. LIC (Amendment) Bill 2009 aims to increase the equity of LIC from Rs.5 crores to Rs.100 crores. 2. The LIC (Amendment) Bill 2009 also contains another amendment to provide sovereign guarantee on a selective basis, instead of the absolute guarantee provided all these years.
Advantage India India is among the world's youngest nations, with a median age of 25 years as compared to 43 in Japan and 36 in the US. This, coupled with the increasing disposable income and growing demand for personal financial security indicate a promising future for the insurance industry. Premium income as a percentage of GDP has increased from 3.3 per cent in 2002–03 to 7.6 per cent in 2008– 09 Expansion in the insurance industry has necessitated specialized risk management, business continuity planning and asset liability management.
Risk managemen t for strategic advantage
Young consumer segment with increasing disposable income
Wide range of insurance products available
Advantage India Mode of employme nt
Mode of infrastructural development Rising contribution to GDP
Insurance companies are providing a wide range of products to meet the diverse requirements of the Indian population. According to the Eleventh Five Year Plan (2007–2012), the infrastructure sector requires an investment of US$ 428.4 billion. In 2008–09, the insurance industry contributed US$ 15.7 billion to infrastructure funding.
Market Structure Ministry of Finance (Government of India)
Insurance Regulatory and Development Authority (IRDA)
Life insurance (23)
Public (1)
Private (22)
Non-life insurance (22)
Public (7)
Private (15)
Overview of Life Insurance Segment Premium income has grown at a high CAGR of 25.8 per cent between 2002–03 and 2008–09. •The number of policies issued grew at a CAGR of 12.3 per cent. between 2002–03 and 2008–09. •There are 23 players, 1 from the public sector and 22 from the private sector, as of January 2010. •There is increased insurance penetration due to a growing consumer class, rising insurance awareness and increasing domestic savings and investments. A wide range of life insurance products are available. These include: •Group insurance products —endowments, term insurance, annuities, whole life insurance, riders •Individual insurance products —Unit Linked Insurance Plans (ULIPs), pension funds, guaranteed life products
Overview of Non-Life Insurance Segment Premium income grew at a CAGR of 17.6 per cent between 2002–03 and 2008–09. There are 22 players, out of which 7 are public sector players (including 1 reinsurer) and 15 private sector players, as of January 2010. Segments covered include auto, health, fire, marine and engineering, among others.
Product trends: Auto insurance had the largest share in the non-life insurance segment in 2008–09 (43.2 per cent). Health segment recorded a growth of 21.3 per cent in 2008–09 (a growth of 9.3 per cent over 2005–06). Public sector companies have a dominant share in the marine insurance segment.
Growth drivers There is a high demand for insurance products due to a growing middle class, increasing working population, rising household savings and increasing purchasing power. Penetration levels set to increase •The increasing literacy rate, specially in rural India, has spread awareness about the need for insurance. •Between 2006 and 2026, the working population (25–60 years) is expected to increase from 675.8 million to 795.5 million giving rise to a favourable market for insurance companies.
•Projected per capita GDP is expected to increase from US$ 380.8 in 2000– 2001 to US$ 2,097.5 in 2026, reflecting higher disposable income. •Favourable government and regulatory initiatives are expected to increase the contribution of the insurance industry to the overall economic development of the country.
Continue….. Fast progressing medical technology and increasing demand for better healthcare has resulted in rising demand for health insurance. Regulatory initiatives to promote health insurance include: •IRDA has set up a separate department for health insurance. •It has recommended that the government brings down capital requirements for standalone health insurance companies to US$ 10.42 million from US$ 20.83 million. •The government is set to raise budgetary support of US$ 28.33 billion for the health sector during the Eleventh Plan. •International players and life insurers have entered this segment. Launch of innovative products •The life insurance sector has witnessed the launch of innovative products such as ULIPs. Other traditional products have also been customised to meet specific needs of Indian consumers. •The non-life insurance sector has witnessed personal/retail line products pick up on the back of increasing income levels and changing life styles. •Emergence of new distribution channels, such as bancassurance, brokers and echannels, has increased outreach. •Rise in sale of passenger cars, fuelling demand for auto insurance •Between 2002–03 and 2008–09, the number of passenger cars has increased at a CAGR of 14 per cent. This trend is likely to continue due to strong growth in the auto segment resulting from an increase in consumer income levels. Between 2005–06 and
Key Trends and Key Players Emergence of new distribution channels Product innovation Growing market share of private players
• Alternative channels include bancassurance, direct selling agents, brokers, online distribution, corporate agents such as non-banking financial companies (NBFCs) and tie-ups of para-banking companies with local corporate agencies (e.g. NGOs) in remote area.
• Consumers’ need for higher levels of customisation has led to product innovation. • Product innovation will continue to enhance operational efficiency.
• In the life insurance segment, share of the private sector in total premiums increased from 2 per cent in 2002–03 to 29.1 per cent in 2008–09. • In the non-life insurance segment, share of the private sector in total premiums increased from 9.5 per cent in 2002–03 to 41.1 per cent in 2008–09.
Key Players - Life Insurance Company
Indian promoter partner(s) LIC Government of India ICICI Prudential ICICI Bank Ltd Bajaj Allianz Bajaj Auto SBI Life SBI HDFC Standard Life HDFC Birla Sun Life Aditya Birla Group Reliance Reliance Group Max New York Max, India Tata AIG Tata Group Aviva Dabur OM Kotak Life Kotak Mahindra Bank Metlife Jammu & Kashmir Bank, Shapoorji Pallonji, Max ING Vysya Gujarat Ambuja, Enam, Exide Shriram Life Shriram Group Sahara Sahara Group Bharti AXA Bharti Group IDBI Fortis Life IDBI, Federal Bank Future Generali Future Group Canara HSBC OBC Canara Bank, OBC AEGON Religare Religare Star Union Dai-ichi Bank of India, Union Bank of India IndiaFirst Life Insurance Bank of Baroda and Company Andhra Bank
Foreign partner(s)
Market share (2008–09) (in per cent) None 70.92 Prudential, UK 6.92 Allianz, Germany 4.79 BNP Paribas, France 3.25 Standard Life, UK 2.51 Sunlife, Canada 2.06 None 2.22 New York Life, USA 1.74 AIG, USA 1.24 CGU Life, UK 0.90 Old Mutual, South Africa 1.06 Metlife, USA 0.90 ING Insurance, Netherlands Sanlam, South Africa None AXA Insurance, France Fortis, UK Generali Group, Italy HSBC, Asia Pacific AEGON, USA Dai-ichi, Japan
0.65 0.20 0.09 0.16 0.14 0.07 0.13 0.01 0.02
Legal & General Middle 0.00 East Limited, UK
Key Players – Non-Life Insurance
Company
New India Assurance National Insurance United India Insurance Oriental Insurance ICICI Lombard Bajaj Allianz Reliance IFFCO Tokio Tata-AIG Royal Sundaram Cholamandalam HDFC ERGO General Future Generali Shriram General Universal Sompo
Indian promoter partner(s) Government of India Government of India Government of India Government of India ICICI Bank Bajaj Group Reliance Group IFFCO Tata Group Sundaram Finance & Associates Murugappa Group HDFC Future Group Shriram Group
Allahabad Bank, IOB, Karnataka Bank Bharti AXA Bharti Group Raheja QBE Raheja Group GIC (Re-insurer) Government of India Health insurance Indian promoter partner(s) Star Health & Allied Star Health and Allied Insurance Insurance Co Apollo DKV Apollo Hospitals Agriculture Insurance Co GIC and its four
Foreign partner(s)
None None None None Lombard, Canada Allianz, Germany None Tokio Marine Asia AIG,USA Royal & SunAlliance Plc,
Market share (2008–09) (in per cent) 18.03 13.98 13.97 12.94 11.18 8.63 6.26 4.95 2.89 2.63
Mitsui Sumitomo, Japan ERGO, Germany Generali Group, Italy Sanlam Group, South Africa Sompo, Japan
2.24 1.11 0.64 0.37
AXA Insurance, France QBE Holdings, Australia None Foreign partner(s)
0.09 0.00 Market share (2008–09) (in per cent) 1.67
ETA Ascon Group, Oman DKV, Germany None
0.10
0.16 2.63
Insurance Regulatory and Development Authority (IRDA) IRDA was constituted as an autonomous body to regulate and develop the business of insurance and reinsurance in India. The authority was constituted on 19 April 2000; vide Government of India’s notification no. 277. Role of IRDA 1. Regulatory: It frame and issue statutory and regulatory stipulation, guidelines and clarification. 2. Developmental and Promotional: The developmental and promotional role includes facilitating the growth of the market by attracting a large number of players.
Objectives of IRDA 1. Policy holder protection 2. Healthy growth of the insurance market
Policy and Regulatory Framework
A company, to operate as an insurance company in India, must be incorporated under the Companies Act, 1956, and possess the certificate of the memorandum of association and articles of association.
Capital requirement —paid up capital for life and non-life insurance is Rs 100 crore and for reinsurance is Rs. 200 crore.
At least US$ 416.7 million for reinsurance business
International players can operate in India only through a joint venture with a domestic firm and are classified under private sector insurers.
FDI up to 26 per cent is permitted in the insurance sector.
IRDA does not allow foreign reinsurance companies to open branches in India. This proposal is currently under consideration in the Parliament. IRDA and the Securities and Exchange Board of India (SEBI) are in the process of finalising their directives and provide detailed guidelines for M&A.09 FDI norms : The Insurance Laws (Amendment) Bill, 2008, proposes to provide for the increase in shareholdings by a foreign company from the current limit of 26 per cent to 49 per cent. Disclosure norms : IRDA is drafting norms for mandatory disclosure of insurers’ financial statements, investment portfolios at regular intervals, financial and operating ratios, actual solvency margin, policy-lapse ratio, current financial position, risk management architecture, etc. Set up a data warehouse to monitor settlement of insurance claims. Publishing policy and draft documents in regional languages for better understanding and extending reach.
Opportunities High potential demand for insurance products •Since more than two-thirds of India’s population lives in rural areas, microinsurance is seen as the most suitable aid to reach the poor and sociallydisadvantaged sections of society. •Favorable demographics, fast progression of medical technology and increasing demand for better healthcare have facilitated a high growth in health insurance. Growing demand for Indian insurance off shoring business •Total revenues from Indian offshore insurance business process outsourcing (BPO) services are estimated to have increased from US$ 367 million in 2002–03, US$ 790 million in 2006–07 to US$ 2 billion by 2009–2010. •Employment is expected to more than double from 41,600 in 2005–06 to around 100,500 in 2009–2010. •Lower penetration of the health insurance sector •In India, the total expenditure on health, as a percentage of GDP, was 5 per cent in 2006–07 as against15.2 per cent in the US, 8.2 per cent in the UK and 4.7 per cent in China. Of this, government expenditure constituted 3.5 per cent. •The health insurance industry has the potential to become a US$ 5.21 billion industry by 2012. •Life insurance companies are likely to target primarily the young population so
Continue…. Growing pension sector •In India, the government provides limited social security to its citizens as reflected in the fact that less than 4 per cent of the population is covered under the social security schemes. Only government employees are entitled to pension benefits post-retirement. •The opening of the pension sector and the establishment of the new pension regulator have expanded the avenues for private sector employees. Rising demand from semi-urban and rural population for micro-insurance products •The industry is also promoting micro-insurance as a viable business opportunity and integrating the same with the poverty alleviation programmes of various state governments. •Poor insurance literacy and awareness, high transaction costs, inadequate regulations and inadequate understanding of client needs and expectations have restricted demand for micro-insurance products. •However, with the development of rural health insurance regulations and growing awareness about micro-insurance products, focus of many private players has shifted to these areas.
THANKS
