Kochi Presentation

8/6/2019 Kochi Presentation

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1

Developments in Indian Life Insurance Industry

16 th December 2010, Kochi



2

Agenda

Snapshot of Indian Life Insurance Industry

Expenses of Life Insurance Companies

Inclusive Growth of Life Insurance Sector

Protection of Policyholders Interest

Investment by Life Insurance Companies



3

Snapshot of Indian Life Insurance Industry

Life Insurance Industry completes a decade of opening up.

Currently there are 23 players in the Life Insurance Industry.

20 Insurance companies have JVs with foreign partners.

LIC, Reliance Life Insurance and Sahara Life Insurance company are the three companies

who do not have JVs.

All the major international players are present in the Indian Insurance market.

A high capital intensive industry-Rs. 30,396 Cr deployed.(As of 30th Sept 2010)

Foreign partners have brought in capital of Rs.5053 Crs as FDI.(As of 31st March 2010)

India has the largest in-force policies in the world.



Snapshot of Indian Life Insurance Industry.contd

Parameters FY 99-00 FY 07-08 FY 08-09 FY 09-10 Apr-Sep2010

(provisional)

Number of players 1 18 22 23 23

CapitalDeployed (Rs. Cr) 5 16,692 24,988 28,943 30,396

Branches 2,048 8,913 11,815 12,018 11,837

Employees (in Lacs) 1.23 2.54 2.85 2.70 2.62

Individual Agents (in Lacs) 7.14 25.20 29.37 29.78 27.60

Source: IRDA, Life Insurance Council (Apr-Sep 10 data is provisional)4

More than 72 % of branches are located in Class C cities or lower



Parameters FY 99-00 FY 07-08 FY 08-09 FY 09-10 Apr-Sep

2010(provisional)

New Business Policies (In Cr) 1.69 5.08 5.09 5.32 2.00

In force Policies (In Cr) 10.14 25.76 29.60 30.40 31.22

New Business Premium

(Rs.Cr)

8,299 93,713 87,331 1,09,894 62,450

Renewal premiums

(Rs. Cr)

17,951 1,07,639 1,34,454 1,55,556 62,805

Total Premium (Rs. Cr) 26,250 2,01,351 2,21,785 2,65,450 1,25,254

Source: IRDA, Life Insurance Council (Apr-Sep 10 data is provisional)5

As per IRDA guidelines Life Insurance Companies have to mandatorily sell 18%policies in rural areas.

Snapshot of Indian Life Insurance Industry....contd



Snapshot of Indian Life Insurance Industry ..contd

Source: IRDA

Parameter FY 99-00 FY 07-08 FY 08-09 FY 09-10

Indias share of world premium (Life) 0.50% 1.83% 1.98% 2.45%

Penetration as % of GDP 1.77% 4.0% 4.0% 4.60

New Business Policies (In Cr) 1.69 5.08 5.09 5.32

In force Policies (In Cr) 10.14 25.76 29.6 31.89

6

The industry services largest number of life insurance policies in the world



Snapshot of Indian Life Insurance Industry ..contd

Parameter FY 06-07 FY 07-08 FY 08-09 FY 09-10 Apr-Sep

2010

(provisional)

Total Death Benefit paid(Rs.Cr) 4,794 5,288 6,125 8,385 4,937

TotalMaturity claim paid(Rs. Cr) 34,356 34,543 37,806 NA NA

Total Benefits paid (Rs.Cr) 56,887 61,686 58,527 95,883 64,742

7Source: IRDA, Life Insurance Council (Apr-Sep 10 data is provisional)

Benefits Paid



8

Agenda

Inclusive Growth of Life Insurance Sector



10

Agenda

Investment by Life Insurance Companies



Investment by Life Insurance Companies..contd

Pattern of investment

Rs. Crs

Instruments FY 2009-10 As on 30th Sep 2010

Equity 4,46,881 5,29,444

Fixed Income (Debt) 8,10,904 8,72,577

Others 32,161 33,185

Total 12,89,946 14,35,206

Source: Life Insurance Council (data is provisional)12



13

Agenda





Source: IRDA14

Insurance is a long term contract with average tenure of 15 years.

Comparatively high start-up cost to be related to a long tenure.

Under Section 40 B of Insurance Act 1938, there is a capping on expenses of management.

- Exemption is granted to companies in first 5 years of operation.

- Any non-compliance later is viewed adversely by IRD

A.

Maximum Commission payable to agents under various product heads is prescribed in the

Insurance Act (section 40 A).

Longer the term of the policy, lower is the premium and therefore percent commission is

higher. For shorter term policies the percent commission is lower as premium is higher. Thisensures that the absolute commission is reasonable.

In last four years (i.e. from FY 06-07 to FY 09-10) more than Rs.1,55,600 crores of premium

was collected at a commission of less than 2.0%



15

Agenda

Protection of Policyholders Interest



Protection of Policy holders interest...Contd

Under regulation 6(1)Policy holders are given a 15 day free-look period from the date of receipt of policy document, where in the policy holder can review the terms and condition

of the policy and opt to return the policy and claim refund.

Section 45 of the Insurance Act 1938 - Policy not to be called in question on ground of

mis-statement after two years.

U/s 17d of Insurance Act 1938, there is a capping on expenses of management.

Overall capping of expenses for ULIP is:-

More than 10 years - 225 bps

Less than 10 years - 300 bps

17



Protection of Policy holders interest...Contd

Recent Regulatory Changes

Cap on surrender charges / discontinuance.

Lock in period increased to 5 years

Even spread of charges during the lock in period

Guarantee of return at maturity for ULIP Pension / Annuity Plans (4.5%)

Minimum life insurance cover should be 110% of Single Premium for age at entry of 45

years and above and 125 % for age at entry below 45 years.

Disclosure of Commission to the prospect.

18



Transparency and Corporate Governance

Public Disclosures

Companies are required to disclose detailed financial & statistical information on

quarterly /half yearly and yearly basis on their website.

Companies are required to publish audited half yearly and annual financial statementin newspapers.

Corporate Governance

Companies are required to follow Corporate Governance guidelines which are

followed by all listed companies in India.

Protection of Policy holders interest.Contd

19



Note:-

There are 12 ombudsman Centre's in India.

The companies cannot challenge the decision of the ombudsman

Protection of Policy holders interest..Contd

Register a Complaint with the Toll free number / helpline of the Company

Complaint to the Grievance officer of the company

Complaint to Council /IRDA / Ombudsman

20

Grievance RedressalMechanism



Kerala Specific Data

Parameter FY 07-08 FY 07-08 FY 08-09 FY 09-10

IndividualNew Business Premium

(In Cr)

3,913 6,347 4,073 4,635

IndividualNew Business Policies 20,38,410 26,67,078 25,13,726 24,35,371

Branches 371 646 839 831

Number of Agents 1,10,127 1,40,099 1,59,408 1,59,884

21Source: IRDA



Thank You

22



Life Insurance New Business Premium

Source: IRDA 23

Category 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Premium % Premium % Premium % Premium % Premium % Premium %

Life 20,258 77 28,534 74 50,988 67 55,796 60 61,906 71 71,756 66

Annuity 1,759 7 1,668 4 1,982 3 2,577 3 4,357 5 5,686 5

Pension 4,077 15 8,575 22 22,649 30 35,245 37 20,388 23 31,676 29

Health 123 0.5 8 0.02 30 0.04 94 0.1 339 0.39 335 0.31

Total 26,217 38,785 75,649 93,712 86,990 1,09,453

Rs.Crs

Note: Figures may not add up to 100% due to rounding off



Life Insurance Business

Source: IRDA 24

Category 2005-06 2006-07 2007-08 2008-09 2009-10

Pension & Annuity 10,243 24,631 37,822 24,745 37,362

Rs.CrsNew Business Premium collected for Pension and Annuity schemes in last 5 years

Category 2005-06 2006-07 2007-08 2008-09 2009-10

Pension Policies 20,42,661 67,59,813 99,23,334 51,56,146 64,66,139

Policies

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