Among top insurance markets India ranked 10 th among 147 countries in the life insurance business, with a share of 2.03 per cent during FY13 The country ranked 19 th among 147 countries in the non-life premium income, with a share of 0.66 per cent in FY13 Rapidly growing insurance segments The life insurance premium market expanded at a CAGR of 16.6 per cent, from USD11.5 billion in FY03 to USD53.3 billion in FY13 The non-life insurance premium market rose at a CAGR of 15.4 per cent, from USD3.1 billion in FY03 to USD13.1 billion in FY13 Increasing private sector contribution The share of private sector in the life insurance premiums increased from 5.7 per cent in FY03 to 28.7 per cent in FY13 The market share of private sector companies in the non-life insurance premium market rose from 9.5 per cent in FY03 to 42.9 per cent in FY13 Crop, Health and Motor insurance to drive growth Crop insurance market in India is the largest in the world and covers around 30 million farmers; it accounted for nearly 5 per cent of the total non-life insurance premium in FY12 Strong growth in the automotive industry over the next decade to be a key driver of motor insurance Health insurance continues to be one of the most rapidly growing sectors in the Indian insurance industry, and reported 16.1* per cent growth in gross premiums in FY13 Source: Swiss-Re, IRDA, Mckinsey estimates Note: * Figures for FY13 are provisional
FY13 Market size: USD66.4 billion Growing Strong demand demand Growing interest in insurance among people; innovative products and distribution channels aiding growth Increasing demand for insurance offshoring Attractive opportunities Life insurance in low-income urban areas Health insurance, pension segment Strong growth potential for microinsurance, especially from rural areas CY20E Market size: USD350-400 billion Increasing investments Rising participation by private players has increased their market share in the life insurance market to 29.3 per cent in FY12 from 2 per cent in FY03 Increase in FDI limit to 49 per cent from 26 per cent, as proposed in 2012, will further fuel investments Advantage India Policy support Tax incentives on insurance products Passing of Insurance Bill gives IRDA flexibility to frame regulations Clarity on rules for insurance IPOs would infuse liquidity in the industry Repeated attempts to make the sector more lucrative for foreign participants Source: IRDA Notes: Estimate according to BCG, IRDA - Insurance Regulatory and Development Authority, IPO - Initial Public Offering, FDI - Foreign Direct Investment
2000 onwards 1993 99 Before 1956 The life insurance sector was made up of 154 domestic life insurers, 16 foreign life insurers and 75 provident funds 1956 72 All life insurance companies were nationalised to form LIC in 1956 to increase penetration and protect policy holders from mismanagement The non-life insurance business was nationalised to form GIC in 1972 Malhotra Committee recommended opening up the insurance sector to private players IRDA, LIC and GIC Acts were passed in 1999, making IRDA the statutory regulatory body for insurance and ending the monopoly of LIC and GIC Post liberalisation, the insurance industry recorded significant growth; the number of private players increased to 44 in 2012* Customers are more conscious of the benefits of insurance and its importance for a secure future The industry has been spurred by product innovation, vibrant distribution channels, coupled with targeted publicity and promotional campaigns by the insurers Source: IRDA Notes: * - As of September 2012, LIC - Life Insurance Corporation of India, GIC - General Insurance Corporation of India, IRDA - Insurance Regulatory and Development Authority
Insurance Regulatory and Development Authority (IRDA) Established in 1999 under the IRDA Act Responsible for regulating, promoting and ensuring orderly growth of the insurance and re-insurance business in India Public (1) Life Insurance (24 players) Private (23) Ministry of Finance (Government of India) Insurance Regulatory and Development Authority (IRDA) Non-Life Insurance (27 players) Public (6) Private (21) Re-insurance (1 player) Public (1) Source: IRDA, Aranca Research Note: Data as of March 2013
With a share of 2.03 per cent, India stood 10 th among 147 countries in the life insurance business in FY13 The growth in non-life insurance premium in India outperformed the average global growth as well as the emerging markets over 2010 12 Life insurance premium growth rates* in India, emerging markets and the world Non-life insurance premium growth rates* in India, emerging markets and the world 16% 12% 11% 16% 14% 8% 4% 0% -4% -8% -12% 3% 5% -2% -3% -5% -10% -7% 2010 2011 2012 India Emerging World 2% 12% 8% 4% 0% 10% 10% 9% 9% 8% 3% 2% 2% 2010 2011 2012 India Emerging World Source: Swiss Re, Aranca Research Notes: Growth rate in USD terms and is inflation adjusted, * - Figures for India correspond to FY11, FY12 and FY13, IRDA - Insurance Regulatory and Development Authority
The total insurance market expanded from USD14.7 billion in FY03 to USD66.4 billion in FY13 Gross premiums written in India (USD billion) Over FY03 FY13, total gross written premiums increased at a CAGR of 16.3 per cent 80.0 60.0 CAGR: 16.3% 57.8 55.5 64.3 74.6 72.3 66.4 40.0 20.0 14.7 18.1 21.6 28.8 40.6 0.0 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 Non life insurance premium (USD billion) Life insurance premium (USD billion) Source: Swiss Re, Aranca Research
FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 The life insurance market grew from USD11.5 billion in FY03 to USD53.3 billion in FY13 Growth in life insurance premiums (USD billion) Over FY03 FY13, life insurance premiums expanded at a CAGR of 16.6 per cent 50.2 48.2 56.0 64.0 59.9 53.3 The life insurance industry has the potential to grow 2-2.5 times by 2020 in spite of multiple challenges supported by long-term trends and fundamentals underlying household savings 11.5 14.4 CAGR: 16.6% 17.5 24.0 34.6 Source: Swiss Re, BCG, Aranca Research
FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 Life insurance penetration increased to 3.2 per cent in FY13 from 2.6 per cent in FY04 Life insurance density* expanded from USD13.4 in FY04 to USD42.7 in FY13 at a CAGR of 13.7 per cent Life insurance penetration (%) Life insurance density (USD) 2.6 2.5 2.8 3.9 4.4 4.2 4.7 4.0 3.5 3.2 13.4 15.7 20.4 CAGR: 13.7% 43.9 40.9 31.2 47.7 52.5 48.6 42.7 Source: Swiss Re, Aranca Research Note: Life insurance density* is defined as the ratio of premium underwritten to the total population in a given year
FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 Share of private sector has been growing over the years, from around 2 per cent in FY03 to 27 per cent in FY13 The Gross Direct Premium of private companies increased from USD0.2 billion in FY03 to USD14.4 billion in FY13 at a CAGR of 51.1 per cent Share of public and private sector in life insurance segment (%) FY13 Share of public and private sector in life insurance segment (USD billion) FY03 37 34 39 45 42 98.0% 2.0% 27.3% 72.7% 28 21 11 14 17 0 1 2 3 6 38 13 14 17 19 18 14 Size: USD11.5 billion Size: USD52.9 billion Private (USD billion) Public (USD billion) Public Private Source: IRDA, Aranca Research
Currently, the life insurance sector has 23* private players compared to only four in FY02 Market share of major companies in terms of total life insurance premium collected (FY13) LIC is still the market leader, with 72.7 per cent share in FY13, followed by ICICI Prudential, with 4.7 per cent share 2.3% 1.8% 2.4% 8.5% LIC ICICI Prudential 3.6% 3.9% 4.7% HDFC Standard SBI Life Bajaj Allianz 72.7% Max Life Birla Sunlife Others Source: IRDA, Aranca Research Notes: * - As of September 2013; Excluding reinsurer, LIC - Life Insurance Corporation of India
The industry is witnessing a shift towards the traditional non-linked insurance plans Share of linked and non-linked insurance premium The share of non-linked insurance increased from 59.1 per cent in FY09 to 83.0 per cent in FY13 41% 44% 37% 24% 17% The non-linked premiums expanded at a CAGR of 16.1* per cent to USD43.9 billion during FY09 FY13 59% 57% 63% 76% 83% FY09 FY10 FY11 FY12 FY13 Linked Premium Non-Linked Premium Source: IRDA, KPMG analysis Notes: * - Growth rate in INR terms, Linked Plans - In linked plans, a part of the investment goes towards providing you life cover while the residual portion is invested in a fund which in turn invests in stocks or bonds; the value of investments alters with the performance of the underlying fund In Non-Linked plans, a major chunk of investible funds are in debt instruments, giving steady and almost assured returns over the long term
FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 The non-life insurance market grew from USD3.4 billion in FY04 to USD12.7 billion in FY13* Over FY04 FY13*, non-life insurance premiums increased at a CAGR of 16.4* per cent The number of policies issued increased from 43.6 million in FY03 to 107.0 million in FY13, at a CAGR of 9.4 per cent Growth in Non-Life insurance premium (USD billion) Number of Non-Life insurance policies (million) 107 CAGR: 16.4*% 4.4 4.2 4.6 3.8 3.6 2.8 3.1 3.3 0.3 0.5 0.8 1.2 1.9 2.7 2.7 2.9 6.7 6.8 5.8 3.8 4.7 5.1 44 42 50 51 CAGR: 9.4% 67 68 57 47 79 86 Private (USD billion) Public (USD billion) Source: IRDA, Aranca Research Note: * - Growth rate in INR terms
FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 The non-life insurance penetration rate was in the range of 0.6 0.8 per cent over 2004 13 Non-life insurance density increased from USD3.5 in FY04 to USD10.5 in FY13 at a CAGR of 13.0 per cent The global average density of USD283.1 in 2012 indicates a huge potential for growth Non-Life insurance penetration (%) Non-Life insurance density (USD) 0.78 10.1 10.5 CAGR: 13.0% 8.7 0.67 0.61 0.63 0.66 0.73 0.66 3.5 4.0 4.4 5.0 6.3 6.0 6.7 0.63 0.63 0.61 Source: Swiss Re, Aranca Research
Motor insurance forms the largest non-life segment at 43.2 per cent share in FY13, with Gross Direct Premium of USD5,466.6 million Medical insurance formed 21.8 per cent of the total in FY13, with Gross Direct Premium of USD2,763.9 million Break-up of non-life insurance market in India (FY13) Total size: USD12.7 billion 17.2% Motor Medical Insurance Motor third party insurance, which contributes nearly 50 per cent of the total motor insurance premium, remained the fastest growing segment in FY13 with Gross Direct Premium of USD2,390.8 million 3.6% 4.3% 9.8% 43.2% Fire Crop Insurance Engineering 21.8% Miscellaneous and others Source: IRDA, Aranca Research
FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13* The market share of private sector companies rose from 14.5 per cent in FY04 to 43.0 per cent in FY13 The Gross Direct Premium of private companies increased from USD0.5 billion in FY04 to USD5.5 billion in FY13* at a CAGR of 33.1** per cent FY04 Growing share of private sector FY13 Non-life insurance premium of private sector (USD billion) 5.0 5.5 CAGR: 33.1**% 3.8 85% 15% 43% 57% 0.5 0.8 1.2 1.9 2.7 2.7 2.9 Size: USD3.4 billion Public Private Size: USD12.7 billion Source: IRDA, Aranca Research Notes: * Figures for FY13 are provisional, ** Growth rate in INR terms
The number of companies increased from 15 in FY04 to 27 in FY13; six of these companies are in the public sector The public sector companies together accounted for about 57 per cent of the total Gross Direct Premium in the non-life insurance segment New India leads the market with 16.7 per cent market share Private players are not far behind and compete better in the non-life insurance segment Market share of major companies in terms of Gross Direct Premium collected (FY13) Total size: USD12.7 billion 29.1% 4.6% 5.6% 8.6% 9.5% 16.7% 12.9% 13.0% New India United India National Oriental ICICI Lombard Bajaj Allianz AIC Others Source: IRDA, Aranca Research Note: Excluding reinsurer
Emergence of new distribution channels New distribution channels like bancassurance, online distribution and NBFCs have widened the reach and reduced costs Firms have tied up with local NGOs to target lucrative rural markets Growing market share of private players In the life insurance segment, share of the private sector in total premiums increased to 29.3 per cent in FY12 from 2.0 per cent in FY03 In the non-life insurance segment, share of the private sector increased to 42.9 per cent in FY13* from 14.5 per cent in FY04 Launch of innovative products The life insurance sector has witnessed the launch of innovative products such as Unit Linked Insurance Plans (ULIPs) Other traditional products have also been customised to meet specific needs of Indian consumers Mounting focus on EV over profitability Large insurers continue to expand, focussing on cost rationalisation and aligning business models to realise reported embedded value (EV), and generate value from future business rather than focus on present profits Notes: * - Figures for FY13 are provisional, NBFC - Non Banking Financial Company, NGO - Non-governmental Organisation, EV - Embedded Value
2000 2010 FY13 2015E 2000 2010 FY13 2015E India s robust economy is expected to sustain the growth in insurance premiums written Higher personal disposable incomes would result in higher household savings that will be channeled into different financial savings instruments like insurance and pension policies Household savings are expected to grow to USD540 billion by 2015E from USD89 billion in 2000 89 Household and financial savings projections Household savings (USD billion) 540 306 369 45 Financial savings (USD billion) 141 202 248 Financial savings are expected to grow to USD248 billion by 2015E from USD45 billion in 2000 Source: ICICI, RBI Annual Report, Aranca Research Notes: Financial savings denote investment in equity and debt instruments, E - Estimates
Growing affluence of the middle class The emergence of an affluent middle class is triggering demand for both life and non-life personal insurance lines A rising number of young professionals are opting for health insurance, motor insurance and ULIPs Indian residents shifting from low-income to highincome groups Million Household, 100% 50 26 15 32 Income segment Deprived (<1657) Aspirers (1657-3682.5) 40 29 35 25 17 12 2 6 1 3 7 2008 2020 2030 Seekers (3682.5-9206.4) Strivers (9206.4-18412.8) Globals (>18412.8) Source: McKinsey Quarterly, Aranca Research
Tax incentives Insurance products are covered under the exempt, exempt, exempt (EEE) method of taxation. This translates to an effective tax benefit of approximately 30 per cent on select investments (including life insurance premiums) every financial year Union Budget 2013 14 The proposed Insurance (Amendment) Bill is expected to empower IRDA to introduce regulations for promoting sustainable growth, providing the flexibility to frame regulations and increase the FDI limit to 49 per cent The government has also extended Rashtriya Swasthya Bima Yojana (RSBY) to cover unorganised sector workers in hazardous mining and associated industries Life insurance companies allowed to go public IRDA recently allowed life insurance companies that have completed 10 years of operations to raise capital through initial public offerings (IPOs) Companies will be able to raise capital if they have embedded value of twice the paid up equity capital Approval of increase in FDI limit and revival package Increase in FDI limit will help companies raise capital and fund their expansion plans Revival package by government will help companies get faster product clearances, tax incentives and ease in investment norms Notes: RSBY - Rashtriya Swasthya Bima Yojana, FDI - Foreign Direct Investment
The IRDA Act, 1999 allowed an FDI of up to 26 per cent in the insurance sector on an automatic route subject to obtaining license from IRDA Cabinet has approved an increase of FDI limit to 49 per cent through the Insurance Laws Amendment Bill (2008). The increase in FDI limit will take effect following approval from the Parliament Top Life Insurance Co Foreign partner Domestic partner Year of incorporation Prudential plc (26%) ICICI Bank Ltd (74%) 2000 Allianz SE (26%) Bajaj Finserv Ltd (74%) 2001 BNP Paribas Cardif (26%) SBI (74%) 2000 Standard Life (26%) HDFC Bank (72.4%) 2000 Sun Life Financial, Inc (26%) Aditya Birla Group (74%) 2000 Nippon Life Insurance (26%) Reliance Capital (74%) 2005 Mitsui Sumitomo Insurance (26%) Max India (74%) 2000
Top Non-Life Insurance Co Foreign partner Domestic partner Year of incorporation Fairfax Financial Holdings Ltd (26%) ICICI Bank Ltd (74%) 2000 Allianz SE (26%) Bajaj Finserv Ltd (74%) 2001 Tokio Marine & Nichido Fire Insurance Group (26%) IFFCO (74%) 2000 Source: Aranca Research
Investments from the private sector are increasing, as they see a huge opportunity in the growing insurance sector of the country Most of the existing players are tying up with banks to expand their distribution network Few players like HDFC Life are planning to go public; others are selling stakes to generate funds Religare Health Insurance USD110.4 million by 2016 IndiaFirst Life Insurance USD28 million in 2010; plans to invest USD45 million in 2011 Aviva Life USD26 million in 2010 Reliance Life USD58 million in 2011 Canara HSBC Life USD22 million in 2011 Bharti AXA Life Plans to inject USD100 million in 2011 AEGON Religare Life USD71 million in 2010; plans to invest USD445 million through 2016 ING Vysya Life USD53 million in 2010 HDFC Life Going public by FY14 Source: Towers Watson; Assorted News Articles; Aranca Research
IMPACT CHANGE IRDA cleared bill IRDA issues TPA regulations Foreign players allowed to enter with 26 per cent FDI cap IRDA insurance brokers and corporate agent regulation Entry of standalone health insurance players allowed 1999 2001 2002 2006 Liberalisation of sector and formation of an independent regulator Entry of TPAs specifically focussed on servicing health insurance business Entry of foreign players infusing capital and technical expertise Thrust on insurance distribution through corporate intermediaries Entry of standalone health insurance players Source: KPMG, Aranca Research Note: TPA - Third Part Administrator
IMPACT CHANGE Creation of Indian Motor Third Party Insurance Pool Price detariffication IRDA came out with new guidelines for equity-linked insurance products Merger and Acquisition guidelines Introduction of Declined Risk pool, TP premium increase FDI cap raised from 26 to 49 per cent under automatic route by cabinet 2007 2010 2011 2012 2013 Mechanism to equitably share CVTP losses Significant change in the premium rates for the commercial lines Reduced the first-year agent commission and lock in period extended Enabled consolidation, inorganic transactions in the industry Improvement in overall profitability of the CV segment Cabinet approval still pending on the FDI cap increase Source: KPMG, Aranca Research Notes: IRDA - Insurance Regulatory and Development Authority, CVTP - Commercial Vehicle Third Party, TP - Third Party, CV - Commercial Vehicle
FY08 FY09 FY10 FY11 FY12 FY13 FY08 FY09 FY10 FY11 FY12 FY13 SBI Life Insurance is a joint venture between Indian banking giant State Bank of India (74 per cent) and France headquartered BNP Paribas Assurance (26 per cent) The company primarily deals in life insurance and pension plans with 758 offices across India. In FY13, it issued around 8.9 lakh insurance policies Between FY08 and FY13, SBI Life s profits increased at a CAGR of 81.1* per cent; in FY13, its annual profits increased to USD121.9 million. It had the largest market share (16.9 per cent among all private sector companies in FY13) in the life insurance new business premium Total premium collected (USD billion) Net profit (USD million) 1.4 CAGR: 13.2*% 1.6 2.1 2.8 2.7 1.9 CAGR: 81.1*% 58.2 80.3 116.0 121.9 39.2 8.4 Source: SBI Life Annual Report, IRDA, Company website, Aranca Analysis Note: * - Growth rate in INR terms
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY06 FY07 FY08 FY09 FY10 FY11 FY12 Tata AIA Life Insurance Company Limited (Tata AIA Life) is a joint venture between Tata Sons (74 per cent) and AIA Group Limited (26 per cent) The life insurance premium increased from USD198.8 million in FY06 to USD508.3 million in FY13 at a CAGR of 17.7* per cent The sum assured increased from USD3.5 billion in FY06 to USD12.3 billion in FY12, rising at a CAGR of 24.9* per cent Total life insurance premium (USD million) Total sum assured (USD billion) 874.5 CAGR: 17.7*% 508.5 598.5 736.9 757.3 508.3 9.3 9.0 CAGR: 24.9*% 9.6 11.4 13.3 12.3 198.8 301.9 3.5 Source: Company Website, IRDA, Aranca Research Note: * - Growth rate in INR terms
Objective for establishing microinsurance Fulfilment of corporate social responsibility Increase brand recognition to boost market entry today s micro clients maybe tomorrow s high-premium clients To target untapped markets and income groups of rural India Key strategic decisions The microinsurance business model must be separated from business model Selling microinsurance would require new, alternative distribution mechanisms The microinsurance business model New business unit Partnering with NGOs Forming CRIGs Local operations managed by NGOs A special microinsurance team called the Rural & Social Team is formed Identify and partner with credible NGOs operating in the local community NGO suggests good agents for microinsurance policies (microagents) A group of microagents called a community rural insurance group (CRIG) is formed; it relies on direct marketing of microinsurance policies to local community members Local operations like collecting and aggregating the premiums, training micro-agents, and helping to distribute benefits looked after by the NGO; this saves administrative costs for Tata-AIG Source: Company website, Aranca Analysis
Robust growth in micro-insurance expected Number of policies Premium First year (FYP) and Renewals (RYP) 380,000 410,000 3,200 2,800 190,000 300,000 1,800 2,400 1,900 100,000 2008 2009 2010 2011 2012 Source: Company website, Aranca Analysis 900 800 400 0 300 2008 2009 2010 2011 2012 FYP RYP Source: Company website, Aranca Analysis
New India Assurance a wholly owned subsidiary of Government of India; it is the largest non-life insurance company in India with a market share of 14.5 per cent in FY13** in the non-life insurance segment It is the largest non-life insurer in Afro-Asia, excluding Japan It serves the Indian subcontinent with a network of 1,068 offices, comprising 28 Regional offices, 393 Divisional offices and 648 branches, with nearly 21,000 employees The company has overseas presence in 22 countries: Japan, UK, Middle East, Fiji and Australia It has been rated as "A-" (Excellent) for six consecutive years, indicating its excellent risk-adjusted capitalisation, prospective improvement in underwriting performance and leading business profile in the direct insurance market in India 254 Gross Direct Premium (USD million) 263 295 331 528 538 CAGR: 16.5*% 311 443 621 341 494 327 512 778 850 111 111 133 159 142 217 256 297 329 355 FY09 FY10 FY11 FY12 FY13 Fire Marine Motor Health Miscellaneous and others Source: IRDA, Company website, New India Assurance Annual report Notes: * Growth rate in INR terms, ** Figures for FY13 are provisional, A.M. Best Europe Ltd, Alfred Magilton Best Company Limited Its Gross Direct Premium increased from USD1,406.2 million in FY09 to USD2,186.2 million in FY13, at a CAGR of 16.5* per cent
FY09 FY10 FY11 FY12 FY13 FY09 FY10 FY11 FY12 FY13 ICICI Lombard GIC Ltd is a 74:26 joint venture between ICICI Bank Limited, India s second largest bank, and Fairfax Financial Holdings Limited, a Canada-based diversified financial services company It is the largest private sector general insurance company, with a market share of 8.9 per cent in the non-life insurance sector in FY13** As of FY13, it has 2,757 pan India branches with an employee strength of 7,289 Its Gross Direct Premium increased from USD816.6 million in FY09 to USD1,182.1 million in FY13 at a CAGR of 14.4* per cent Gross Direct Premium (USD million) Number of policies issued (million) 816.6 723.8 CAGR: 14.4*% 967.4 1,117.7 1,182.1 CAGR: 23.4% 5.6 7.6 9.2 4.0 4.5 Source: ICICI Lombard Annual Report, IRDA, Company website, Aranca Analysis Notes: * - Growth rate in INR terms, ** - Figures for FY13 are provisional
Crop insurance Low-income urban and pension markets Opportunities for Indian insurance market Microinsurance Motor insurance markets Health insurance markets Source: Aranca Research
Urban low-income insurance penetration in India is expected to have increased to 40 per cent in 2012 from 30 per cent in 2007 Rapid development in Tier II and Tier III cities and growth in new bankable households have led to the emergence of a large insurable class with an appetite for sophisticated life insurance products Urban low-income insurance penetration in India 30% 40% Insurance density and penetration remain at very low levels compared to that in developed countries; this indicates a strong potential for growth in future Business models need to be customised accordingly to maintain cost-effectiveness, as most low-income customers would be small-ticket accounts, though huge in numbers 2007 2012E Source: IRDA, Asia Insurance Review, Aranca Research Note: E in the axis for the figures above refer to estimates
Increasing life expectancy, favourable savings and greater employment in the private sector will fuel demand for pension plans The opening of pension market with the passing of the PFRDA Bill 2011 will make the pension market more conducive for private life insurers Proposed new pension bill by government will further provide new opportunities to insurers 42 Opportunity in the Indian pension and annuity market CAGR: 7% 84 87% 13% Workers covered Workers not covered There is scope to introduce new-generation pension products such as Variable Annuity and Inflation Indexed Annuity 2010 2025E* Indian retirement market (USD billion) Formal pension system penetration (2010) Source: McKinsey Quarterly, Aranca Research Notes: PFRDA - Pension Fund Regulatory and Development Authority * Expected value, at 2009-10 rates
The number of new policies issued increased at a CAGR of 9.4 per cent from FY03 to FY13, from 43.6 million to 107.0 million Despite strong growth, non-life insurance sector remains far from tapped, with penetration rates (premium to GDP ratios) remaining low at 0.78 per cent in 2012 compared to an average of 4.5 per cent in the US and global average of 2.8 per cent Strong growth in the automotive industry over the next decade will be a key driver of motor insurance Proposed IRDA draft envisages a 10 80 per cent rise in premium rates for the erstwhile loss-making third-party motor insurance Breakup of non-life insurance market in India (FY13) Vehicle production in India* (million units) Motor 32.0 17.2% Medical Insurance 3.6% 4.3% 9.8% 21.8% 43.2% Fire Crop Insurance Engineering Miscellaneous and others 2.8 9.2 Car Production 2.3 0.7 Commercial 2010 2020E 9.0 2&3 wheelers Source: IRDA, Aranca Research Notes: E in the axis for the figures above refer to estimates, * - ACMA Estimates, GDP - Gross Domestic Product
Only 1.5 2 per cent of total healthcare expenditure in India is currently covered by insurance providers From 13.3 per cent of the total non-life insurance premium in FY07, health insurance currently contributes 22.2** per cent Total health insurance premiums increased from USD733.1 million in FY07 to USD2,824.7 million in FY13** at a CAGR of 29.1* per cent Health insurance penetration (million policies) 220 CAGR: 8% 110 Health insurance continues to be one of the most rapidly growing sectors in the Indian insurance industry; it reported 16.1* per cent growth in gross premiums in FY13** Absence of a government-funded health insurance makes the market attractive for private players IRDA recommended the government to reduce capital requirements for stand-alone health insurance companies from USD21 million to USD10 million 2005 2015E Source: McKinsey Quarterly, Annual Report IRDA, Aranca Research Notes: * Growth rate in INR terms ** Figures for FY13 are provisional E - Estimate
Introduction of health insurance portability expected to boost the orderly growth of the health insurance sector Population covered by health insurance (in million) Penetration of health insurance is expected to more than double by 2020 Increasing penetration of health insurance likely to be driven by government-sponsored initiatives such as RSBY and ESIC Government-sponsored programmes expected to provide coverage to nearly 380 million people by 2020 Private insurance coverage is estimated to grow by nearly 15 per cent annually till 2020 140 240 110 120 80 25 55 20 35 130 2010 2020E Private insurance Govt employee insurance ESIC RSBY State insurance Source: Mckinsey estimates, Aranca Research Notes: RSBY - Rashtriya Swasthya Bima Yojna, ESIC - Employees State Insurance Corporation
The business environment in India s microinsurance sector supports healthy growth Macro level (The enabling environment) Intermediate level (Support infrastructure) IRDA drafted microinsurance guidelines in 2010, which contain numerous favourable measures such as Lower threshold limits for agents commissions Rural areas must account for 7 per cent of new life insurance policies in the first year of firm s operation and rise to 20 per cent over the next 10 years In order to reduce microinsurance distribution costs, IRDA proposed microinsurance schemes to supplement existing government insurance schemes The number of regional rural banks and NGOs operating in the rural sector will aid distribution of microinsurance products Micro level (Policy holders) The annual income growth rate in rural India is expected to increase to 3.6 per cent over 2010 30 from 2.8 per cent during 1990 2010 About 5 million people currently have microinsurance, while the entire market is expected to be in the range of 140 300 million Source: IRDA, McKinsey, Aranca Research
Number of Micro-insurance policies (in millions) 19.8 18.9 New business premium (USD million) 84.4 14.7 14.8 52.3 63.6 12.6 16.8 16.3 13.3 43.9 79.3 57.9 48.0 43.7 2.1 3.0 2.6 1.5 FY09 FY10 FY11 FY12 8.4 5.1 5.7 4.3 FY09 FY10 FY11 FY12 Private Public Total Private Public Source: IRDA, McKinsey, Aranca Research
Crop insurance market in India is the largest in the world, covering around 30 million farmers Crop insurance coverage Number of farmers covered (million) Crop insurance accounted for nearly 5 per cent of the total non-life insurance premium in FY12 0.7 0.4 2.4 9.3 11.7 0.4 1.2 To provide crop insurance to farmers, Government has launched various schemes like National Agriculture Insurance Scheme (NAIS), Modified National Agriculture Insurance Scheme (MNAIS) and Weather-based Crop Insurance Scheme (WBCIS) The number of farmers covered increased at a CAGR of 11.5 per cent from FY08 to FY12, while the sum insured rose at a CAGR of 22.0* per cent from USD6.5 billion to USD12.1 billion over the same period There is huge scope for increasing coverage, as only 30 million farmers out of 120 million are insured under crop insurance schemes Government of India plans to increase the coverage to 50 million during the 12 th Five-Year Plan 18.4 19.2 23.9 17.6 16.7 FY08 FY09 FY10 FY11 FY12 NAIS MNAIS WBCIS Sum insured (USD billion) 1.0 3.1 4.4 0.4 0.2 0.2 0.7 6.1 5.8 8.1 7.5 7.1 FY08 FY09 FY10 FY11 FY12 NAIS MNAIS WBCIS Source: Agricultural Insurance Company of India Annual report, Department of Agriculture and Cooperation, IRDA, Aranca Research Note: * - Growth rate in INR terms
Insurance Regulatory and Development Authority (IRDA) 3 rd Floor, Parisrama Bhavan, Basheer Bagh, Hyderabad 500 004 Phone: 91-040-23381100 Fax: 91-040-66823334 E-mail: irda@irda.gov.in Life Insurance Council 4 th Floor, Jeevan Seva Annexe Bldg. S. V. Road, Santacruz (W), Mumbai 400054 Phone: 91-22-26103303, 26103306 E-mail: ninad.narwilkar@lifeinscouncil.org General Insurance Council 5 th Floor, Royal Insurance Building, 14, Jamshedji TATA Road, Churchgate, Mumbai 400020 Phone: 91-22-22817511, 22817512 Fax: 91-22-22817515 E-mail: gicouncil@gicouncil.in
CAGR: Compound Annual Growth Rate IRDA: Insurance Regulatory and Development Authority IPO: Initial Public Offering FDI: Foreign Direct Investment LIC: Life Insurance Corporation of India GIC: General Insurance Corporation of India NBFC: Non-Banking Financial Company NGO: Non-Governmental Organisation RSBY: Rashtriya Swasthya Bima Yojana PFRDA: Pension Fund Regulatory and Development Authority GDP: Gross Domestic Product ESIC: Employees State Insurance Corporation
FY: Indian Financial Year (April to March) So, FY12 implies April 2011 to March 2012 GOI: Government of India INR: Indian Rupee USD: US Dollar Where applicable, numbers have been rounded off to the nearest whole number
Exchange rates (Fiscal year) Exchange rates (Calendar year) Year INR equivalent of one USD Year INR equivalent of one USD 2004-05 44.95 2005-06 44.28 2006-07 45.28 2007-08 40.24 2008-09 45.91 2009-10 47.41 2010-11 45.57 2011-12 47.94 2012-13 54.31 2005 45.55 2006 44.34 2007 39.45 2008 49.21 2009 46.76 2010 45.32 2011 45.64 2012 54.69 2013 54.45 Average for the year
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