India Market Life Insurance Update

Transcription

1 dy India Market Life Insurance Update India Issue 9 June 0 Introduction We are pleased to release our 9th quarterly newsletter on the life insurance industry in India, covering developments during March 0 to May 0. Statistics released by the Insurance Regulatory and Development Authority of India (IRDAI) indicate that the life insurance industry witnessed a contraction of 9.8% in weighted new business premium collections in FY0-, largely due to the fall of nearly.% recorded by the state owned Life Insurance Corporation of India (LIC), reportedly owing to absence of unit-linked products from its portfolio until the end of the year. As a result, LIC s overall market share in terms of weighted new business collections has declined by nearly 0.% to.% over the reporting period. Private insurers, on the other hand, have recorded a growth in new business collections of.6% in FY0- over the previous fiscal. As per the financial statements of private insurers as at March 0, 9 out of private insurers have reported net profit in FY0-. However, profit after taxes for all private insurers combined have fallen to INR6 in FY0-, a year- on-year fall of.%. The passage of the Insurance Laws (Amendments) Act, earlier in the year, has empowered regulator with significantly greater powers. Following this the IRDAI has released a few regulations, guidelines and exposure drafts and more regulations are expected to be released over this financial year. The key update during the reporting period is the exposure draft on registration of corporate agents. The IRDAI was considering to adopt open architecture, however having considered shareholder interest of the bank promoter insurance companies this move has been put on hold. The regulator has approved more than 600 products since revised product guidelines were issued in 0. The revised product portfolios of majority of the life insurers indicates an evident shift towards non-linked products. We provide an overview on these and other market developments in this edition of the newsletter. We hope you continue to find the newsletter interesting and informative and look forward to receiving your feedback. In this issue Industry statistics Weighted new business premium income earned during FY0- Profits/ (losses) of private life insurance companies for FY0- Market update Stake transfers Company news New entrants Appointments Other developments Embedded Value disclosures by private life insurers as at March 0 Regulatory update IRDAI (Micro Insurance) Regulations, 0 IRDAI (Transfer of Equity Shares of Insurance Companies) Regulations, 0 Development of integrated e-filing system Guidelines on International Financial Service Centres (IFSC) Other regulatory developments Update on exposure draft on registration of corporate agents Distribution update Distribution mix of private insurers for FY0-. New business volumes through bancassurance Products update Products approved by the IRDAI between March 0 and June 0 Total product portfolio of insurers as at June 0 Market trend Contact details Towers Watson - Risk Consulting & Software, India Copyright 0 Towers Watson. All rights reserved. towerswatson.com

2 Industry statistics Private life insurers recorded a double digit growth of.6% in new business premium collections in FY0-. However, the state-owned insurer LIC, witnessing a double-digit fall of.%, pulled down the aggregate industry performance to an overall decline of 9.8% in the same period. Signs of turn-around in the life insurance sector are evident with 9 out of private life insurers declaring profits for FY0-. Weighted new business premium income earned during FY0- Weighted new business premium collections of private life insurers - FY0- and FY0- (INR ) ICICI Prudential Life Source: IRDAI SBI Life HDFC Life Max Life Reliance Life Birla Sun Life Bajaj Allianz Life Kotak Life PNB MetLife Star Union Dai-ichi Life Others FY0- FY0- +.6% Year-on-year growth in new business premium collection by private life insurers in FY0- -.% Year-on-year growth in new business premium collection by LIC in FY0- Weighted new business premium collections of the life insurance industry in FY0- and FY0- (INR ) LIC As per statistics released by the IRDAI, the life insurance industry collected weighted new business premiums of INR6 in FY0-, an overall decline of 9.8% over the previous financial year. LIC recorded a contraction of.% in its weighted new business premium collections in FY0-, resulting in a contraction of its market share from 6.6% to.%. The individual business of LIC witnessed a year-on-year decline of 7.% while group business decreased.7% over the previous financial year. Meanwhile, private life insurers outperformed the state-owned insurer, recording a noteworthy year-on-year growth of.6% in their weighted new business premium collections during FY0-. ICICI Prudential Life continued to remain the market leader in FY0- among private life insurers, with its total market share in the life insurance industry strengthening from.6% to 8.7% over the previous financial year, on the back of a significant growth of 9.% in weighted new business premiums. Star Union Dai-ichi Life has entered the top ten rankings for weighted new business premiums among private life insurers in FY0- with Canara HSBC OBC Life moving out of the top ten rankings due to a contraction of 0.% in weighted new business premiums. Among the top ten ranked private life insurers in terms of weighted new business premiums, Bajaj Allianz Life is the only private insurer to have experienced a decline in new business during the year, witnessing a fall of.% in weighted new business premiums. The positive growth for private sector insurers can mainly be attributed to the increased sales of unit-linked products owing to a surge in the equity market, an improvement in the overall economic environment and increased stability in the insurance sector in FY0-. Total private players FY0- FY0- Source: IRDAI Copyright 0 Towers Watson. All rights reserved. towerswatson.com

3 Profits/(losses) of private life insurance companies for FY0- Out of the private players, 9 have reported a profit in FY0-, compared to 6 for FY0-. However, total net profit for private insurers has fallen by.% from INR6,0 million for FY0- to INR,699 million for FY0-. ICICI Prudential Life has reported greatest absolute profits of INR6, million in FY0-, followed by Bajaj Allianz Life with a net profit of INR8,76 million. Of the 9 private insurers to have reported profit, have witnessed a positive year-on-year growth in their profit after tax for the period under study. DHFL Pramerica Life has observed a significant growth in its profit to INR99 million in FY0- from INR9 million in the previous year. Star Union Dai-ichi, IndiaFirst Life and IDBI Federal Life are other private insurers which have recorded a healthy growth in profit after taxes in FY0-. On the other hand, Aegon Religare Life has witnessed a year-on-year increase in its losses from INR million to INR million. Reliance Life has also witnessed a significant fall in its profits from INR,89 million for FY0- to INR, million for FY0-. Following insurers have reported maiden profits in FY0-: IndiaFirst Life has broken-even by reporting profits in its sixth year of operations. Canara HSBC OBC Life Star Union Dai-ichi Life Profits/(Losses) after tax in FY0- and FY0- (INR millions) Aegon Religare Life Aviva Life Bajaj Allianz Life Bharti Axa Life Birla Sun Life DLF Pramerica Life Edelweiss Tokio Life Future Generali Life HDFC Life ICICI Prudential Life IDBI Federal Life IndiaFirst Life Exide Life Kotak Life Max Life PNB MetLife Reliance Life Sahara Life SBI Life Shriram Life Tata AIA Life (,000),000 6,000 0,000,000 FY0- FY0- Source: Public Disclosures Notes: Figures for Aviva Life and Sahara Life are not available as at March 0, hence figures for the period April to December of the respective financial years have been used in the above update. Future Generali Life has reported maiden profits in its ninth year of operations. Bharti AXA Life, which has been in operations for around nine years is yet to break-even. Similarly, Edelweiss Tokio Life, youngest of all private insurers, has still not reported profits since its inception in 0. Copyright 0 Towers Watson. All rights reserved. towerswatson.com

4 Market update Following increase in the Foreign Direct Investment (FDI) limit in the Indian insurance sector to 9%, many foreign insurers have expressed interest to increase their stake in their existing joint ventures. Additionally, three new social security schemes launched by the government seem poised to increase insurance penetration at a grass root level. Stake transfers Following the passage of the Insurance Laws (Amendment) Act 0, which raises foreign investment in the insurance sector to 9% from 6%, there have been several announcements expressing interest in transfers of stake between the domestic and foreign shareholders of insurance joint ventures in India. However, the progress to date in terms of physical capital flows have been slower due to a lack of clarity on the clause for Indian management and control specified in the Act, along with other operational concerns. The Finance Ministry issued a statement clarifying that the foreign shareholding in parent companies of insurance ventures would not be counted as foreign ownership for computation of FDI in the insurance ventures, unless the foreign shareholder in the parent company of the insurer is also a shareholder of the insurance company. A summary of press announcements by various life insurance companies is summarised in the table below: Insurer Partner to increase the stake Reported status Bharti AXA Life AXA Foreign Investment Promotion Board (FIPB) has reportedly approved AXA s proposal to increase its stake to 9% for a reported investment of INR8.6. Edelweiss Tokio Tokio Marine As per press reports, an application has been filed with FIPB for an approval to increase the stake. HDFC Life Standard Life Media speculations suggest that the Company is expected to launch an Initial Public Offering (IPO) in FY0-6. In the meantime, reports suggest that Standard Life is in discussions with HDFC Bank for a transfer in stake up to % to allow for some headroom for foreign investments in the event of an IPO. Birla Sun Life Sun Life Media speculations suggest that Sun Life wants to increase their stake. However, there is no clarity currently on the timing and amount at the time of publishing. Star Union Dai-ichi Life Dai-ichi As per press reports, Bank of India plans to transfer 8% of its stake to Dai-ichi. IDBI Federal Ageas Reportedly, IDBI Bank and Federal Bank plan to transfer stake to Ageas. Reports suggest that preliminary discussions have been kicked off among the partners. Aegon Religare BCCL As per press reports, Religare Enterprises is planning to exit the venture and transfer its 0% stake to its existing partner Bennett, Coleman and Company Ltd (BCCL), pending regulatory approvals. Aegon Meanwhile Aegon is also in discussions with the stakeholders to increase its interest in the venture to 9%. Shriram Life Sanlam Sanlam is reportedly looking to increase its stake in the joint venture. SBI Life BNP Paribas Cardif Media speculations suggest that SBI wants to offload some stake and BNP Paribas has the first right to refusal. However, it is anticipated that the increase in stake would be lower than the maximum permissible limit of 9% at this stage. Current stake Reported interest in stake change 6% % 6% % 6% 9% 6% % 6% 8% 6% % 6% % 6% % 6% 0% Media reports suggest that ICICI Prudential Life was looking to sell a % stake to financial investors at USD. to USD6. However, subsequent reports suggest that the negotiations have been called off due to the high valuation. Copyright 0 Towers Watson. All rights reserved. towerswatson.com

5 Company news Max India Limited with 7% stake in the insurance venture Max Life has received approval from Competition Commission of India for its corporate restructuring proposal. The company will split into three separate listed entities, Max India Limited, Max Ventures and Industries Limited and Max Financial Services Limited. Max Financial Services will solely focus on life insurance business. Exide Industries which is the sole owner of Exide Life has infused additional capital of INR. in its insurance business. New entrants Limited speculation suggests that the Swiss insurer Zurich Insurance Group plans to enter the Indian insurance sector and is studying the rules and regulations applicable to the Indian market. Appointments Hitoshi Yamaguchi has succeeded M. Nakamura as the Deputy CEO and Chief Financial Officer (CFO), effective April 0 at Star Union Dai-ichi Life. Sachin Dutta has replaced Shally Gambhir as the Chief Risk Officer (CRO), effective 6 March 0 at Canara HSBC OBC Life. Subrat Mohanty has taken over the role of Chief Marketing Officer (CMO), Sameer Bakshi has been appointed as CRO and Manish Kumar Jha as Chief Compliance Officer (CCO) of Bajaj Allianz Life. I Samba Siva Rao has been appointed as the Consulting Appointed Actuary, effective April 0 at Shriram Life. Other developments The governement has taken steps to bolster penetration of life insurance by launching three social security schemes: Pradhan Mantri Suraksha Bima Yojana for accidental death insurance, Pradhan Mantri Jeevan Jyoti Beema Yojana for life insurance and Atal Pension Yojana for fixed pension. Individuals must have a savings bank account to be able to apply for these schemes. The Pradhan Mantri Suraksha Bima Yojana offers accidental death insurance cover worth up to INR00,000 for a premium of INR per annum and is available to individuals in the age group of 8 to 70 years. Under the Pradhan Mantri Jeevan Jyoti Beema Yojana, a yearly renewable term assurance cover is provided for a sum assured of INR00,000 at an annual premium of INR0 to individuals in the age group of 8 to 0 years. The Atal Pension Yojana provides a fixed annual pension ranging between INR,000 to INR,000 from age 60 onwards, depending on the level of contribution. The schme is targeted at individuals in the unorganised sector who join the National Pension Scheme (NPS) and are not members of any existing government social security scheme. Individuals within the age group of 8 to 0 years are eligible for this scheme. While most insurers are selling these products through their existing bacnassurance partners, a few insurers have also entered into new tie-ups to promote these schemes: LIC is offering the scheme through its existing tie-ups with Bank of Maharashtra and Corporation Bank as well as through new tie-ups with Bharatiya Mahila Bank, Federal Bank, IDBI Bank, Karnataka Vikas Grameena Bank and Jammu Central Cooperative Bank. SBI Life has entered in to a new tie-up with Vijaya Bank to offer this scheme. Reports suggest that 6.6 million people have already enrolled under this scheme within two months of its launch. Copyright 0 Towers Watson. All rights reserved. towerswatson.com

6 Embedded Value (EV) disclosures by private life insurers as at March 0 EV methodologies have evolved over time, with the result that in the absence of an agreed industry standard, different valuation experts approach company valuations differently. Although various attempts have been made to make EV calculations consistent and comparable, companies currently continue to use varying approaches for internal purposes. Summarised below is the information for the life insurance companies in India which disclosed their EV as at March 0 Max Life, HDFC Life, Bajaj Allianz Life and ICICI Prudential Life: Max Life* HDFC Life Bajaj Allianz Life ICICI Prudential Life Reported EV As at March 0 INR. INR 88.0 INR 9.0 INR 7. Capital** As at March 0 INR 9.87 INR.60 INR 8.6 INR. EV / Capital ratio Change in EV from FY- to FY- +INR 8. +INR 8.0 +INR 7.0 +INR 9.6 Reported new business margin (pre expense-overruns).%.% 8.%.6% Methodology used Internally developed market consistent approach ~ MCEV ~ IEV ~ IEV Discount rate used Risk-free rates (Govt. bond curve) Risk-free rates (Govt. bond curve) Risk-free rates Risk-free rates (Govt. bond curve) Source: Company investor releases and public disclosures *At March 0, Max Life reported an EV of INR9., based on EEV approach using a single risk discount rate. During FY0-, Max Life has updated its EV methodology to what it deems to be a more market consistent approach and has re-stated its EV at March 0 to INR.0, due to the methodology change. **Capital presented above includes paid up share capital and share premium account as per Company disclosures EV disclosures are not mandatory in India. Nonetheless, certain companies have voluntarily reported their EV at March 0 which have been summarised above. It is noted that all companies that reported EV during the year witnessed a material positive addition to shareholder net worth during the year. New business margin indicates the expected shareholder value from new business expressed as a percentage of weighted new business premium income. This was reported to be in the range of %. However, it should be noted that the new business margins may not be directly comparable across companies due to differences in internal methodologies adopted in calculating this margin. We have noted that life insurers reporting EV are increasingly moving towards adopting a market consistent methodology for their valuation. Max Life, particularly, had been calculating EV based on a single risk-discount rate as commonly carried out under a traditional approach until last year and has moved to a market consistent approach in FY0-. As per the investor release of Max India Limited, the parent company, Max Life has been valued at INR.0 as at March 0 using the market consistent methodology. This represents an increase of.% from INR9. as determined using the TEV methodology as at March 0. Indian Embedded Value (IEV) is calculated in accordance with Actuarial Practice Standard 0 issued by the Institute of Actuaries of India, required for companies looking for public listing through an IPO. The methodology of calculating the IEV is broadly in line with that of MCEV as both use a market consistent valuation of assets and liabilities, in addition to making an explicit allowance for risks as against the traditional embedded value (TEV) approach wherein risks are provided for implicitly through the risk discount rate. Copyright 0 Towers Watson. All rights reserved. towerswatson.com 6

7 Regulatory Update The Insurance Laws (Amendment) Act 0, grants greater powers to the IRDAI, following which the regulator has released a number of new regulations, exposure drafts and guidelines. The most significant developments during the quarter have been ongoing discussions on the draft exposure on corporate agents and the regulations on micro-insurance. IRDAI (Micro Insurance) Regulations, 0 The regulator has released micro insurance regulations which supersede the IRDAI (Micro Insurance) Regulations, 00. The key points included in the regulation are: A life insurance company can tie-up with a general insurer to distribute both life and general micro-insurance products. In addition to one life and one general insurance company, a micro-insurance agent may also work with Agriculture Insurance Company of India Ltd and with any one of the standalone health insurance companies. Micro insurance products should allow flexible premium payment options to enable the policyholders to remit premiums in fragmented parts of modal instalments. Further, the regulations mention that micro insurance products cannot be offered under unit linked platform. All micro-insurance products will have a lock-in period of five years during which surrenders would not be allowed, but partial withdrawals from the second policy year may be permitted. Regional rural banks, micro-finance institutions, district cooperative banks, non-governmental organisations, self-help groups, urban cooperative banks, banking correspondents and individual owners of kirana stores, public call offices, fuel stations, fair price shops and medical shops in rural areas may be permitted to distribute micro-insurance products. An insurer may enter into a deed of agreement with a person or entity whose micro-insurance agency agreement was terminated only after the expiry of three months from the date of termination. However, no insurer shall re-appoint a micro-insurance agent who was terminated on grounds of fraud or misconduct. IRDAI (Transfer of Equity Shares of Insurance Companies) Regulations, 0 The IRDAI has released regulations on the transfer of equity shares of insurance companies. The regulations prescribe conditions where transfer of equity shares would require prior approval from the IRDAI and the procedure of the same. The main highlights of the regulations include: Prior approval of the regulator is required, if, after the transfer the total paid up holding of the transferee in the shares of the insurance company is likely to exceed five percent of its paid up capital, or, the nominal value of equity share capital to be transferred exceeds one percent of the paid up equity capital of the insurer. Conditions on minimum lock in period and infusion of additional capital at periodic intervals to ensure regulatory solvency requirements is maintained might be imposed for transfers between Indian promoter and foreign investor. Further, the regulations mention that where there are one or more investors in the insurance company, no investor can hold a share greater than ten percent of the paid up equity capital of the insurance company. Also, the investors cannot jointly hold more than percent of the equity share capital of the insurance company. Development of integrated e-filing system The insurance regulator has developed an integrated e-filing system, known as Business Analytics Project (BAP), for submission of periodical returns by insurers and intermediaries. The launch of the e-filing system is being undertaken in a phased manner and the module for life insurance has been released recently. The insurers were required to submit all the returns for FY0- by 0 June 0 and use the e-filling for future submission of returns within the prescribed timelines. All submissions require digital signature of the Appointed Actuary. The module for submitting new product approvals has also been released for the life sector and future producing filings can be submitted through BAP from June 0 onwards. Copyright 0 Towers Watson. All rights reserved. towerswatson.com 7

8 Corporate agency model in other countries Revised exposure draft Introduction Guidelines on International Financial Service Centres (IFSC) An IFSC is a hub of financial services within a country which has laws and regulations different from the rest of the country. These centres deal mainly with the flow of money, financial product and services across borders. The guidelines issued by the IRDAI set forth eligibility criteria and the registration procedure for establishing the IFSC Insurance Office (IIO) for reinsurance and insurance business in India. All Indian insurers can set up an IIO for both, the reinsurance and direct insurance business. However, a foreign insurer that wishes to set up an IIO requires authorization by the regulator of the country where it is registered and it must be in continuous operation for five preceding five years. Others The IRDAI released draft regulations on the Obligation of Insurers to Rural and Social Sectors, 0. The rural sector obligation has been defined as a percentage of the total policies written direct in that year. The percentage is dependent on the number of years the insurer has been in business. The obligation ranges from 7% in the first financial year to % from the 6 th financial year onwards. The regulation also stipulates insurers to sell a minimum of 0.% of their policies during first year in socially backward areas, this would gradually increase to % of their policies from year ten onwards. The regulator released a circular on the handling of unclaimed amounts pertaining to the policyholders specifying that the insurers under no circumstances should write unclaimed claims as income. Further, these unclaimed amounts must be shown as a separate line item in the balance sheet under current liabilities. Exposure draft on registration of corporate agents The existing regulation on corporate agents follows a tied agency model, in which a corporate agent can have a tie-up with only one insurer from the same line of business. To increase insurance penetration in India, the IRDAI was considering a proposal to adopt open architecture making it mandatory for banks to tie-up with minimum two and maximum three insurers (within the same line of business) specifying the maximum limit on premium income from one insurer to be 90% in the first year and gradually reducing it to 0% from one insurer by the fourth year. While the insurers which don t have a bancassurance tie-up were looking forward to the move, it was a concern for bank-promoted insurance companies. Having considered shareholder interest the move towards open architecture has been put on hold. Key highlights of the revised exposure draft on registration of corporate agents are: A life insurance corporate agent can have arrangements with a maximum of three life insurers to solicit, procure and service their life insurance products. In case the prospective corporate agent is registered or licensed with another regulator in the financial sector, they are required to obtain a no objection certificate from the respective regulator. For a corporate agent exclusively doing insurance intermediation, a minimum equity share capital and net worth of INR million has been prescribed. A corporate agent whose revenues from insurance intermediation activities is more than 0% of their total revenue from all the activities, would be required to take out a professional indemnity insurance cover. The open architecture model for banks has been successful in some of the other countries in which it was previously introduced. It is a distribution model found certain countries of Northern Asia including Japan, Korea, China, Taiwan and in the USA. In Asia, many markets have bancassurance models principally based on open or semi-open architecture, with banks distributing insurance products marketed by a range of different suppliers. However, it is interesting to note that there is a significant reorientation towards a more integrated model in some countries. China - The bancassurance regulations introduced in 00 triggered a boom in over-the-counter sales of insurance policies by bank branches. Some major banks used up to 0 different suppliers for life insurance, and as many as 0 for property and casualty insurance. Following regulatory reforms, a number of banks have established bank-owned insurers to drive greater alignment. Banks, however, are increasingly more inclined towards working with potentially fewer partners with stronger and more aligned relationships. Taiwan - A large proportion of life insurance savings policies sold through banks are marketed using the open architecture model, there have been a number of joint ventures set up by major banks and foreign insurers over the last few years. Insurance penetration in Taiwan is the highest in Asia at over % with banks contributing over 60% of first year premium income. United States - The open architecture bancassurance model has not seen a high success rate with bancassurance market share as low as two percent in 0. Some experts attribute this slow growth the almost total separation between the insurance provider and bank distributor, as banks essentially just sell third-party insurance products to their clients. Copyright 0 Towers Watson. All rights reserved. towerswatson.com 8

9 Distribution update In this edition, we provide a summary of the distribution mix of private insurers in terms of individual new business premium collections in FY0-. With banacassurance emerging as a dominant distribution channel for private players we also provide a summary of bancassurance tie-ups of the Indian life insurers and unweighted total new business premium through bancassurance in the FY0- The state-owned insurer, LIC, plans to to tie-up with Bandhan as a bancassurance partner. Bandhan is the largest micro-lender in the country, based out of Kolkata and was granted a banking license by the Reserve Bank of India last year. Bandhan plans to open 600 branches and is aiming to transform into a fully operational bank by September 0. Max Life has entered into a five year bancassurance arrangement with Lakshmi Vilas Bank to sell its life insurance products utilising the bank s vast network of 00 branches across the country. Prior to this, Lakshmi Vilas Bank was a bancassurance partner of LIC. Reliance Life is reportedly planning to strengthen its agency distribution network by adding 0,000 agents in FY0-6. Capitalising on the inherent advantages of the online distribution channel, insurers are strengthening their online presence by launching a variety of products online to cater to varied needs of the customers: Max Life plans to sell its unit-linked products online where it has already been selling term products. It plans to start with a couple of unit-linked products and subseqyently include a variant of pension product as well. PNB MetLife has recenlty forayed into health insurance segment by launching an online health product that covers illnesses for a period of 0 years. The insurer plans to provide a comprehensive portfolio of products online soon. Distribution mix of private life insurers for individual unweighted new business premium for FY0- Source: Towers Watson analysis based on public disclosures Figures for Aviva Life and Sahara Life are based on December 0 disclosures During FY0- bancassurance channel of distribution contributed 7% to the total unweighted individual new business premium collection, while the individual agency channel contributed 6%. The respective contribution of bancassurance and individual agency channels in the FY0- was % and 0% respectively. Bancassurance emerged as a dominant distribution channel for individual new business by private players over the FY0-. Meanwhile, LIC continued to remain agency led. Prudential Life, SBI Life, HDFC Life and Max Life have a balanced mix of both the agency and bancassurance channels. Bajaj Allianz Life, Tata AIA Life and Edelweiss Tokio Life continue to remain agency-driven in the FY0-. Notably, Kotak Life, Bajaj Allianz Life and Exide Life have exhibited a year-on-year increase in agency dependence. Meanwhile, PNB MetLife and Reliance Life have appeared to leverage the direct business channel as well. The top four private insurers in terms of unweighted individual new business premium collections: ICICI Copyright 0 Towers Watson. All rights reserved. towerswatson.com 9

10 New business volumes through bancassurance Total unweighted new business premium income (individual and group) through banks in FY0- Copyright 0 Towers Watson. All rights reserved. towerswatson.com 0

11 Products update Non-linked products continue to dominate product launches by insurers as they accounted for close to 90% of the products approved by the IRDAI during March to June 0. Nonetheless, there has been a revival in the sales of unit-linked products riding on a pick-up in economic growth, stock-market boom, stability in the insurance market and better awareness of customers about financial assets. Products approved by the IRDAI between March 0 and June 0 The graph below depicts products approved by the IRDAI since March 0, split by non-linked products and unit-linked products, as per data released by the regulator as of 9 June 0. The stacked bars represent non-linked products and unit-linked products as proportion of the total products approved during the said period for the respective insurers. Figures in boxes at the beginning of the bars denote number of products in the respective category. New products launched between March 0 and June 0 Bajaj Allianz Life LIC HDFC Life DHFL Pramerica Life Canara HSBC OBC Life Kotak Life IndiaFirst Life Aviva Life Tata AIA Life Star Union Dai-Ichi Life PNB Met Life ICICI Prudential Life IDBI Federal Life Shriram Life Reliance Life Future Generali Life Aegon Religare Life Birla Sunlife Bharti Axa Life SBI Life Exide Life Edelweiss Tokio Life Max Life Non-linked Unit-linked Source: IRDAI s approved product list as of 9 June 0 The regulator has approved 8 products between March 0 and June 0, of which 7 are non-linked products and 0 are unitlinked products. Among private insurers, most number of products have been approved for Bajaj Allianz Life (eight approvals) followed by HDFC Life (six approvals) and DHFL Pramerica Life (five approvals). LIC also got six product approvals during the same period including a unit-linked product, which is its first unit-linked product post the revised product guidelines issued in 0. Total product portfolio of all insurers as at June 0 The graph below depicts the product mix for life insurers split by non-linked and unit-linked products, according to data released by the IRDAI as of 9 June 0 providing a list of products approved by the regulator until the said date. The stacked bars represent non-linked products and unit-linked products as proportion of the total product portfolio for the respective insurers. Figures in boxes at the beginning of the bars denote number of products in the respective category. Copyright 0 Towers Watson. All rights reserved. towerswatson.com

12 Product portfolio as at June 0 Kotak Life HDFC Life Birla Sunlife SBI Life Reliance Life Aviva Life LIC Tata AIA Life Bajaj Allianz Life Edelweiss Tokio Life ICICI Prudential Life Aegon Religare Life PNB Met Life Bharti Axa Life Shriram Life Canara HSBC OBC Life Exide Life DHFL Pramerica Life Max Life IndiaFirst Life Future Generali Life Star Union Dai-Ichi Life IDBI Federal Life Sahara Life Non-linked Unit-linked Source: Products approved by the IRDAI as of 9 June 0 The regulator has approved a total of around 6 products since revised product guidelines were issued in 0 requiring insurers to refile all of their products with the regulator. This includes 8 non-linked products and unit-linked products. As can be noted in the graph above, Kotak Life has the largest product portfolio in the industry with 0 products in total, followed by HDFC Life with 6 products and Birla Sun Life with products. The State-owned insurer, LIC, has a total of 0 product offerings including a recently approved unit-linked product. HDFC Life has the most number of unit-linked products () in the market, followed by ICICI Prudential Life and Kotak Life (0 unit-linked products each). Looking at the mix of non-linked and unit-linked products, private sector leaders HDFC Life and ICICI Prudential Life, in addition to Canara HSBC OBC Life, have the most balanced product offering. On the other end of the spectrum, Bharti AXA Life, DHFL Pramerica Life and Star Union Dai-ichi Life appear to be largely dependent on non-linked products. Market trend There has been a renewed customer interest in unit-linked products as economic growth has picked up, interest rates have reduced, and there is improved stability in the insurance sector leading to positive investor sentiment. We have observed a relatively higher number of unit-linked product approvals by the regulator during this reporting period as compared to the previous quarters, indicating that further rise in sales of unit-linked products may be in the pipeline. Moreover, with LIC launching its first unit-linked product since the revised product guidelines were issued, the market may see a further pickup in unit-linked premium collections. A number of private insurers have reported their sales being driven by unit-linked products and expect to achieve a new business premium growth in excess of % during FY0-6. Reportedly many bank led insurers have aggressively sold unit-linked products banking on the recent surge in stock market. It is noteworthy that LIC has witnessed a significant decline in new business premium collections and lost sizeable market share to private players in FY0- (as highlighted in the Industry Statistics section) which has been largely attributed to absence of unit-linked products from its portfolio until the end of the financial year. Copyright 0 Towers Watson. All rights reserved. towerswatson.com

13 Contact details Towers Watson's Risk Consulting team covers the length and breadth of India with associates based in Mumbai and Gurgaon. Vivek Jalan Director, Risk Consulting & Software, India Dilip Chakraborty Senior Adviser, Towers Watson, India Kunj Behari Maheshwari Senior Consultant, Risk Consulting, India Mumbai /, Solitaire Corporate Park Andheri-Kurla Road, Andheri East Mumbai Tel: 9 () 9900 Fax: 9 () Gurgaon Unitech Business Park, Tower B, nd Floor South City, Sector- Gurgaon 00 Tel: 9 () 800 Fax: 9 () 80 The India Market Life Insurance Update has been prepared by Towers Watson for general information purposes only and does not constitute professional advice. The information, opinions and projections contained in this Newsletter are derived from various sources and have not been independently verified by Towers Watson. If you require professional advice or require any further information please contact any of the above named individuals. ABOUT TOWERS WATSON Towers Watson is a leading global professional services company that helps organisations improve performance through effective people, risk, and financial management. With 6,000 associates around the world, we offer solutions in the areas of benefits, talent management, rewards, and risk and capital management. Towers Watson covers the length and breadth of India and operates from offices in four cities, covering all geographical regions of the country. For more information, please visit towerswatson.com Copyright 0 Towers Watson. All rights reserved. towerswatson.com