India Market Life Insurance Update

India Market Life Insurance Update India Issue 56 September 2014 Introduction We are pleased to release our 56 th quarterly newsletter on the life insurance industry in India, covering developments during June to August 2014. As per data released by the Insurance Regulatory and Development Authority (IRDA), the life insurance industry witnessed a growth of 7.5% in weighted new business premium collections in the first quarter of FY2014-15. The state-owned Life Insurance Corporation of India (LIC) recorded a year-onyear increase of about 4.4% in its weighted new business premium collections during the period from April to June 2014, whilst the private life insurers witnessed a year-on-year growth of nearly 12.2% in their weighted new business premium collections over the same period. As a result, the overall market share of LIC declined marginally from 60.8% to 59.1%, compared to the corresponding period in FY2013-14. Based on an analysis of expenses reported by life insurers, details of which are presented in this newsletter, the overall expenses of life insurers continue to remain generally high, although wide variations are observed for individual players, reflecting strategic choices made by the insurer. Bank-led insurers demonstrated better cost efficiency than those with agency driven distribution models. Buoyed by the positive growth observed in the first quarter of the current financial year, the sentiment within the life insurance industry remains positive amidst expectations that the proposed measures in the finance bill to increase the foreign direct investment (FDI) limit in insurance to 49% from the current 26% will be implemented in the winter session of the Parliament. A key development on the regulatory front has been the release of guidelines by the regulator on the replacement of an insurance policy to curb insurance mis-selling and lapse and reentry promoted by distributors. In a far-reaching development to promote financial inclusiveness, the Prime Minister recently announced the Jan Dhan Yojana, under which participants will be provided with a bank account and eligible members will obtain a life insurance and a separate accidental death cover. In this issue Industry statistics Weighted new business premium income earned during April to June 2014 Individual and group premium collections of private insurers Q1 FY2014-15 Expense ratios of private life insurers April 2013 to March 2014 Market update New Entrants Mergers and acquisitions Company news Finance bill Other developments Financial results - Q1 FY2014-15 Appointments Regulatory update Exposure draft on replacement of life insurance policies Pilot launch of insurance repository system Circular on File and Use (F&U) procedure Guidelines on approved investments Membership of insurers in stock exchanges for proprietary trading Others Distribution update Products update Contact details 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. Towers Watson - Risk Consulting, India Copyright 2014 Towers Watson. All rights reserved. towerswatson.com 1

Industry statistics Buoyed by the improved product offering post the recent regulatory reforms and an enthused macroeconomic environment, the Indian life insurance industry saw healthy growth in new business premium collections in the first quarter of FY2014-15. Private sector outpaced the state-owned insurer during the reporting period and market sentiment, aided by the tax incentives in the recently announced Union Budget, looks promising. Weighted new business premium income earned during April to June 2014 Weighted new business premium collections of private life insurers - April to June 2014 and April to June 2013 (in Rs billion) ICICI Prudential Life Source: IRDA Reliance Life HDFC Life SBI Life Birla Sun Life Max Life Bajaj Allianz Life Aviva Life Kotak Life PNB MetLife Others 0 1 2 3 4 5 6 7 April to June 2013 April to June 2014 +12.2% Year-on-year growth in new business premium collection by private life insurers in April to June 2014 +4.4% Year-on-year growth in new business premium collection by LIC in April to June 2014 Weighted new business premium collections - April to June 2014 and April to June 2013 (in Rs billion) LIC As per statistics released by the IRDA, the life insurance industry collected weighted new business premiums of INR97 billion in the first three months of FY2014-15, representing a growth of 7.5% over the same period of the previous financial year. The LIC recorded a year-on-year increase of about 4.4% in its weighted new business premium collections during the period from April to June 2014, whilst the private life insurers witnessed a year-on-year growth of nearly 12.2% in their weighted new business premium collections over the same period, outperforming the state-owned insurer. As a result, the overall market share of LIC declined marginally from 60.8% to 59.1%, compared to the corresponding period in FY2013-14. ICICI Prudential Life recorded a significant growth in weighted new business premiums and continued to remain the market leader amongst private life insurers in the first quarter of FY2014-15, and strengthened its market share from 5.1% to 6.4%. The other players in the list of top five insurers in terms of weighted new business premium collections Reliance Life, HDFC Life, SBI Life and Birla Sun Life - also witnessed positive year-on-year growth as well as an enhanced market share in the period from April to June 2014. Max Life slipped out of the list of top five insurers in weighted new business premium collections in spite of a healthy 18% year-on-year growth, making way for Birla Sun Life which jumped two spots to the fifth position on account of an impressive 58% increase in weighted new business premium collections over the same period in the previous fiscal. The positive growth observed during the first quarter of the financial year bodes well for the industry and indicates that the transition period required by insurers to adjust to the revised product guidelines issued by the IRDA is now over. More significantly, with tax incentives announced in the Union Budget giving a potential boost to life insurance sales, coupled with expectations of a general macro-economic recovery, the overall mood in the industry appears to be reasonably affirmative. Total private players 0 10 20 30 40 50 60 70 April to June 2013 April to June 2014 Source: IRDA Copyright 2014 Towers Watson. All rights reserved. towerswatson.com 2

Individual and group premium collections of private insurers Q1 FY2014-15 Based on statistics released by the IRDA, a quarter of the new business weighted premium income in the first quarter of FY2014-15 is attributable to group business. LIC, the public sector behemoth, continues to hold a dominant position in both individual business and group business market. The top five private insurers accounted for approximately 70% and 80% of the weighted new business premium collections in individual and group business markets respectively in the first quarter of FY2014-15. The overall mix of individual and group business varies considerably among companies. Premium collections from group business of insurers such as Reliance Life, Birla Sun Life, Bajaj Allianz Life and Kotak Life, are in excess of their premium collections from individual business. Reliance Life and Birla Sun Life are leading the group business space and account for approximately half of the private sector group new business premium income in the first quarter of FY2014-15. Aviva Life finds itself in the list of top ten insurers, in terms of overall new business premium collections (including individual and group), primarily because of its impressive 69% year-onyear growth in group new business premium collections. IndiaFirst Life, ranked 15 th overall, is another insurer displaying a superior performance in the group business market relative to its performance in the individual business market. Interestingly, ICICI Prudential Life, which is the market leader in terms of weighted new business premium collections, is positioned in the ninth spot when ranked on the basis of group business only. HDFC Life and Max Life are examples of other large insurers with a relatively minor proportion of their premium income attributable to group business. Source: IRDA Copyright 2014 Towers Watson. All rights reserved. towerswatson.com 3

Expenses of private life insurers: Size does matter Expenses of private life insurance companies in India continue to remain generally high. However, significant variances are observed in the expense levels for individual companies reflecting strategic choices made, in particular with regards to the dominant distribution channel adopted. Bank led distribution models are demonstrably more cost efficient relative to agency driven distribution. Additionally, in line with conventional wisdom, larger sized companies are able to exploit economies of scale and reduce their expense ratios compared with similarly structured smaller sized players. The chart below illustrates the operating expense ratios for private life insurers in India for the period April 2013 March 2014 (FY2013-14). The expense ratio is measured as the percentage of total operating expenses related to insurance business over total premiums. The expense ratios are displayed alongside a scale measuring the total size of the insurer in terms of total premium income (relative bubble size) as well as the primary distribution channel adopted by the company (horizontal axis). Source: Company public disclosures, Towers Watson analysis Note: AEGON Religare Life, Bharti AXA Life, DHFL Pramerica Life and Edelweiss Tokio Life have been excluded from the analysis, which have expense ratios is excess of 50%. From the above analysis, it is evident that bank led distribution models have proved to be generally more cost effective than agency driven distribution. Moreover, firms where the distribution bank partners are also shareholders are able to manage their overall expenses even more efficiently, thus leveraging financial product distribution synergies with the partner bank. The size of companies also appears to have an important contribution in the insurer s ability to manage overall expense levels with the larger bubbles tending to float towards the bottom of the peer group, demonstrating economies of scale within each distribution model (although in the case of agency driven distribution models, certain exceptions may be observed). It is noteworthy that the public sector behemoth, LIC, has lowest expenses of all life insurers in the industry, akin to those typically seen in developed insurance markets. The overall expense ratios for most companies tend to be in the range typically observed for life insurers in emerging markets, although as the industry matures, there is a visible gradual transition towards lower levels, generally observed in more developed markets at least for the larger players. Number of years of operations does not appear to have a direct correlation with expenses indicating experience of individual companies have been varied over time in respect of achieving expense efficiencies. Copyright 2014 Towers Watson. All rights reserved. towerswatson.com 4

Market update The proposed hike from 26% to 49% in the FDI limit could not be tabled in the budget session of the parliament, but the finance ministry is expecting that the bill will be approved in the next parliamentary session, beginning December 2014. The Prime Minister, in his Independence Day speech, announced the Prandhan Mantri Jan Dhan Yojana. All those who register under the scheme by opening a bank account will get life insurance cover of INR30,000 and an accidental cover of INR100,000. New Entrants ERGO Insurance Group has expressed its intentions to invest approximately USD50 million over the next five years in the proposed venture, Avantha ERGO Life, which is seeking a license to start life insurance operations in India. The startup insurance firm is a joint venture between the Germany based ERGO Insurance Group and the Avantha Group. The insurer s stated strategy is to have a balanced portfolio with nearly 50% traditional non-participating protection business and 50% unit linked business and leverage agency channel as the primary form of distribution. Mergers and acquisitions Jammu and Kashmir Bank is reportedly planning to sell its 5% stake in PNB MetLife and exit the insurance business to focus on its core banking business. As per reports, the stake is expected to be valued around INR5-6 billion. The State Bank of India is reportedly looking to offload a part of its stake in SBI Life to comply with the capital requirements as stated in the Basel III regulatory guidelines. The bank currently holds 74% stake in the life insurer. It also plans to sell the shares it holds in SBI General Insurance and asset management units. Company news Following the insurance regulator s approval for insurers to trade in interest rate derivatives, Edelweiss Tokio Life became the first life insurer to trade in interest rate futures on the National Stock Exchange. IDBI Federal Life has launched 8 day claims settlement guarantee scheme, under which it guarantees to settle the death claims within eight working days after receiving all the necessary documents. The insurer will pay an interest rate of 8% per annum if it fails to settle the claim within the specified period. In a similar development, Reliance Life has launched Claims Guarantee under which it promises to pay claims within 12 working days of receipt of the required documents, failing which it will pay an interest of 6.5% per annum on the sum assured. Finance bill 2014 The long-stalled measure to hike the FDI limit in insurance sector from the current 26% to 49% has been announced in the Finance Bill 2014. The Cabinet has approved the 49% foreign investment in insurance firms whilst ensuring management control remains with Indian promoters. The Bill, however, could not be tabled in the Budget session of the Parliament due to a political preference to refer the proposed amendments to a Select Committee of the Parliament for ratification. The Bill once returned by the Select Committee with its recommendations will be taken up in the winter session of the Parliament. Once the Bill is passed by both houses of the Parliament, the Insurance Laws (Amendment) Bill would be legally enacted. Reportedly, the Finance Ministry has also floated a Cabinet Note for inter-ministerial discussions to ensure swift passage and implementation of the bill in the next session. With the hike in FDI limit expected to be imminent, a number of foreign investors operating in the Indian life insurance market have expressed interest in increasing their stakes in the respective insurers. HDFC Limited has reportedly begun negotiations with Standard Life to sell part of its stake in HDFC Life to the UK based insurer. Sanlam Group is also in talks with Shriram Group and may increase its stake in Shriram Life. Japanese investors Nippon Life and Dai-ichi Life are also looking to hike their stakes in Reliance Life and Star Union Dai-ichi Life respectively. Extending further tax incentives on life insurance, the Finance Bill has proposed to raise the limit of deduction under section 80C of the Income Tax Act from INR100,000 to INR150,000. Premiums paid towards life insurance qualify for a deduction under the afore-mentioned section. On the other hand, the Finance Bill has proposed a tax deduction at source (TDS) of 2% on the maturity proceeds of a life insurance policy. The Bill states that the death benefits will continue to remain tax-free while the maturity benefits shall not attract tax so long as the sum assured is at least 10 times the annual premium, else, the insurers will deduct 2% tax at source of the maturity proceeds and the remaining will be paid by the policyholder. There will, however, be no deduction if the aggregate sum paid in a financial year to an assessee is less than INR100,000. The law comes into effect from 1 October 2014. Micro-insurance policies where the sum assured does not exceed INR50,000 have been kept outside the ambit of the proposed TDS. Copyright 2014 Towers Watson. All rights reserved. towerswatson.com 5

Other developments The Prime Minister in his Independence Day speech announced a financial inclusion scheme called Pradhan Mantri Jan Dhan Yojana which seeks to provide a life insurance cover amounting to INR30,000, in addition to an accident insurance cover of INR100,000 for everyone registering under the scheme by opening a bank account. State-owned insurer, the LIC is expected to underwrite the insurance cover and is reportedly working on the premium and claims payment related modalities of the planned life cover. Owing to the recent surge in the stock markets, there has been a rise in surrenders on unit-linked insurance products. It has also led to a decrease in renewals for these products as customers preferred to surrender these policies and book profits. Life insurers have resorted to a customer segmentation approach to enable them in tailoring products based on the needs of various segments thus identified. Such segmentation also helps the insurers in providing better services to their priority customers. HDFC Life, Max Life and AEGON Religare Life are some of the insurers to have adopted the approach. Financial results - Q1 FY2014-15 Based on the press reports, provided below are the profit figures reported by a few insurers for the first quarter of FY2014-15: Appointments Sonali Athalye has been appointed as the Chief Financial Officer (CFO) of DHFL Pramerica Life. She has succeeded Pradeep K Thapliyal who is currently the Appointed Actuary at the company. Anuradha Lal has succeeded Abhay Tewari as the Appointed Actuary while Ajeet Lodha has taken over the role of Chief Risk Officer of Edelweiss Tokio Life. The position was previously occupied by Yoshiaki Okabe. IDBI Federal Life has appointed Pournima Gupte as its Appointed Actuary. She has succeeded Ruchi Goel. Sahara Life has appointed Ajai Kumar Tripathi and Amit Sinha as Chief Risk Officer and Head of Marketing respectively. Subhendu Bal has taken over the role of Appointed Actuary at SBI Life. The position was previously occupied by Sanjeev Pujari. Abhay Tewari has joined Star Union Dai-ichi Life as the Appointed Actuary, having moved from Edelweiss Tokio Life. He has succeeded Sambasiva Rao in the position. Amitabh Verma has assumed the role of Chief Operating Officer (COO) at Tata AIA Life and will be responsible for ensuring operational excellence across the company. Previously, he occupied the same position at Birla Sun Life Insurance. Max Life reported a net profit of INR1.02 billion, showing a growth of 10% over the same quarter in the previous fiscal. Reliance Life reported a net profit of INR0.34 billion. SBI Life booked a net profit of INR2.41 billion, representing a healthy year-on-year growth of 14%. With the conclusion of the first quarter of FY2014-15, various insurers have stated their business expectations for the financial year. HDFC Life expects a premium growth of around 10% - 15% during the current financial year. IndiaFirst Life aims to achieve a growth in its business of about 20% during the financial year. SBI Life is eyeing a growth of 35% in the gross written premium for this fiscal. Star Union Dai-ichi Life is looking at individual new business premium growth of around 25% this year. The insurer started operations in 2009 and expects to break-even in the current fiscal. Copyright 2014 Towers Watson. All rights reserved. towerswatson.com 6

Regulatory update In an attempt to curb insurance mis-selling and the lapse and re-entry promoted by some distributors, the regulator has introduced guidelines for intermediaries and insurers related to replacement of an insurance policy. Separately, the regulator has also undertaken a two month long pilot project on the insurance repository system during the reporting period, but is yet to release final guidelines on the same. Exposure draft on replacement of life insurance policies Replacement of a life insurance policy refers to selling a new insurance policy to an existing policyholder within 6 months from the date of lapse, surrender, conversion to paid-up or alteration in benefits or premiums of the existing policy. The IRDA has released exposure draft on the guidelines on replacement of life insurance policies to protect the interests of the policyholders and discourage intermediaries inducing policy discontinuance with the intent of soliciting new policy sales. The key features of these guidelines are: A written consent from the prospect for replacing existing policies has to be obtained by intermediary along with the particulars of all existing policies of the prospect and details of those policies that are proposed to be replaced. The prospect needs to be made aware of the consequences of replacement of an existing policy. The existing insurer whose policies are proposed to be replaced needs to be notified. The insurer will then be required to communicate the advantages of continuing the existing life policies, if any, and the consequences of their being replaced, if any, to the policyholder within 7 days of being notified. The proposal form needs to be submitted to the new insurer replacing the existing life policies/annuity contracts after the expiry of 15 days from the date of notifying the insurer whose policies are proposed to be replaced. The consent of the prospect and the reasons for replacement need to be submitted in the prescribed format. The insurers will be required to train their individual agents/specified persons to ensure adherence to the requirements of the guidelines. Circular on F&U procedure The IRDA issued a circular on File and Use (F&U) procedure for Immediate Annuity products and Group products, with effect from 1 October 2014. Immediate annuity products The IRDA has specified that following the introduction of immediate annuity products in the market, life insurers will be allowed to vary the annuity rates within the range of +/-10% of the approved annuity rates without taking prior approval of the IRDA and can file the revised rates along with revised assumptions to the IRDA within 7 days from the date of such revision. This is in order to enable efficient asset and liability management and quick change in annuity rates in changing interest rate scenarios. However, in the event that the revision of rates is more than the specified range, the existing F&U procedure will need to be undertaken. Group products In case of group products, the IRDA requires every insurer to have a Board approved underwriting policy for each group product other than fund-based group products. If different premiums are filed for different mortality rates, the selection of specific mortality rate for a particular group needs to be in accordance with such a policy. The discounts and loadings offered based on various rating factors specific to the group should be in accordance with the Board approved underwriting policy; be based on an objective criteria; and not be at the discretion of the insurer. The discounts and loadings are further limited to 30% of the premiums approved under the file and use procedure. In case the discounts or loadings exceed the 30% limit, these will need to be filed and approved again under the F&U procedure. Pilot launch of insurance repository system The IRDA undertook a two month pilot project that it made mandatory for all life insurers to participate in for the proposed insurance repository system that allows life insurance policies to be held in de-materialised (or digitised) form as opposed to holding physical policies. The IRDA is still waiting to review recommendations by sub committees on insurance repositories and issue revised guidelines on insurance repositories. Copyright 2014 Towers Watson. All rights reserved. towerswatson.com 7

Guidelines on approved investments Interest rate derivatives The IRDA has permitted insurers to hedge their interest rate risk with longer term Interest Rate Derivatives. Until now investments by insurers in Forward Rate Agreements (FRA), Interest Rate Swaps (IRS) and Exchange Traded Interest Rate Futures (IRF) were permitted only up to a maximum of one year. Investment in IRS having implicit/explicit options is prohibited and the overriding principle for the use of such derivatives is that they should be used for hedging purposes only. Membership of insurers in stock exchanges for proprietary trading The IRDA has approved the insurers to become proprietary trading member of a SEBI approved stock exchange for carrying out trades in the debt segment, provided that: The decision to obtain such membership shall be finalised by the Board of Directors. The SEBI guidelines in this regard must be complied with and separate monitoring of such trading transactions must be facilitated. Onshore rupee bonds issued by Asian Development Bank (ADB) and International Finance Corporation (IFC) The IRDA has classified onshore rupee bonds issued by the ADB and IFC as approved investments provided they are governed by the Government of India; approved by the Securities and Exchange Board of India (SEBI) and the proceeds are meant for investment in India. The rating criteria specified by the IRDA Investment Regulations, 2000 must be met to qualify as Approved Investments and these bonds should be valued in line with corporate bonds and debentures. Penalties arising out of such transactions must not be debited to policyholder s account. Concurrent auditor must report non-compliance due to such membership in quarterly audit reports. Other regulatory developments Unique Identification Number (UIN) for social security/ government schemes Global Intermediary Identification Number (GIIN) Circular on launch of online examination system for brokers The procedure of allotting UIN to approved products has been modified to include a specific code to identify the social security schemes/ government schemes explicitly. Indian Insurers are required to obtain a GIIN before 31 December 2014 as the Government of India has finalised the terms of an Inter-Governmental Agreement (IGA) with United States of America to implement Foreign Accounts Tax Compliance Act with effect from 11 April 2014. However, the formal IGA has not been signed yet and the insurers would be advised of next steps in this regard. The IRDA has issued a circular announcing a move towards online training and examination for brokers. Key highlights of this circular are: NIA Pune will be the examination body with NSEIT Mumbai conducting the online exams. The syllabus for the examination has also been revised. Training for brokers will shift to the online mode within a year. The online conduct of training and examination is reportedly expected to reduce costs by more than 50% in all IRDA authorised training centres and also enable more people to take up the broker s examination. Circular on payment of dues and disclosures of unclaimed amount The IRDA has made minor changes to the existing circular on payment of dues to policyholders and disclosures of unclaimed amount which was released in February 2014. The insurers are now required to display information about unclaimed amount on their websites only when the amount exceeds rupees one thousand. The format for the displaying this information has also been changed. The information as at 31 December 2014 needs to be presented in the revised format by 31 January 2015. Copyright 2014 Towers Watson. All rights reserved. towerswatson.com 8

Distribution update Insurers continue to focus on tapping technology based platforms to attract increasingly tech-savvy customers. The reporting period saw insurers tying up with web aggregators in addition to launching innovative and interactive initiatives in this direction. Along with such updates, we have also included a section on online sales channel and bancassurance highlighting the increasing value insurers are attaching to alternative mediums owing to the recent resignations from agents. Bajaj Allianz Life has tied up with the web aggregator Policybazaar.com to have a greater access to online life insurance policy market. Reportedly, the insurer plans to launch six products through the online portal. In addition, the company s existing online products will also be available on Policybazaar.com. The insurer has plans of hiring 40,000 agents in the FY2014-15 to cover up for the loss of new business premium generated via its previous bancassurance partner, Standard Chartered Bank. ICICI Prudential Life has entered into a fifteen year bancassurance agreement with Standard Chartered Bank as part of a regional agreement between Standard Chartered Plc and Prudential Plc covering India and 10 other markets with effect from 1 July 2014. Exide Life is planning to open 9 offices in Eastern India and hire around 18,000 agents as a part of its strategy to expand its presence in the region. HDFC Life expects to witness a 100% increase in its revenue from online insurance sales by 2016. Reportedly, the revenue from this channel has grown 20 times to INR30 million since online sales first began in 2012. In addition, the insurer is also benefiting from quicker premium underwriting, reduced errors and higher persistency through the online sales channel. The company is also offering tablets to its top performing agents enabling the insurance premium to be underwritten on the same day and all the data to be validated online. It further expects to launch a mobile application by October 2014 to enable customers to buy insurance on their handsets. IndiaFirst Life has partnered with Karnataka Vikas Grameena Bank to use their branch network to offer simple insurance under its group term plan. As per press reports, the insurer is also preparing to increase its presence in Maharashtra as a part of its long term growth strategy and is targeting to grow at 20% in FY2014-15. The LIC has tied up with all the five insurance repositories to comply with the IRDA s norm on dematerialistation (or digitisation) of life insurance policies. The state-owned insurer has expressed cost concerns in transferring its large policy base to insurance repository systems. offering late fee concession varying from INR1,000 to INR2,500 depending on the outstanding premium. In a bid to stop mis-selling of products, Reliance Life has started imposing penalties on agents if they do not meet the required level of persistency rates. The insurer is signing claw-back agreements with agents whereby 50% to 100% of the commissions earned by agents can be impounded, in addition to stalling of agents bonuses and promotions. Agents have also been told to pay for the policy document or bear entire administrative costs if their persistency level is below the threshold. Online sales channel and Bancassurance Bancassurance, online sales channel and other alternative distribution channels are becoming increasingly dominant in the life insurance industry India. Life insurers are reportedly considering utilising the wide ATM network of banks to offer life insurance products, thereby reducing the overall distribution cost. IndiaFirst Life has started selling insurance policies through Common Service Centers (CSC), a platform that has been set up by the government through a special purpose vehicle. Products have been exclusively designed to be sold on CSC. Postal Life Insurance (PLI) and Rural Postal Life Insurance (RPLI) are also planning to provide online insurance soon. Online services will include ability to view policies online, make premium payments and download policy information. Deztination Insurance Solutions Pvt. Ltd. has introduced a comparative insurance portal called PolicyBachat.com. PolicyBachat.com is an IRDA approved web aggregator company. Some reports predict that by 2020 nearly 75% of the insurance sales will be online. It is estimated that there would be a savings of 15% to 20% in the total costs of life insurance due to digitisation.. The Coimbatore division of the LIC has launched a threemonth long Lapsed Policy Revival campaign. Through this campaign, the insurer is allowing policyholders who had failed to pay their premiums to revive their policies and is also Copyright 2014 Towers Watson. All rights reserved. towerswatson.com 9

Products update There have been a limited number of product launches in this quarter as insurers have not mostly settled their product portfolios following regulatory changes earlier in the year. The product mix of companies is increasingly weighing towards traditional products from unit-linked products: out of a total of 23 product launches reported for the quarter, 18 are traditional products. A brief description on the products launched in the quarter is covered below. Company name Product name Product description Aviva Life Bajaj Allianz Life Bharti AXA Life DHFL Pramerica Life [2] Future Generali India Life HDFC Life IDBI Federal Life Kotak Mahindra Life LIC Max Life PNB Met Life Reliance Life Sahara Life [7] [2] [2] Aviva Young Scholar Advantage Bajaj Allianz Fortune Gain Secure Income Plan DHFL Pramerica Flexi Cash Plan DHFL Pramerica Smart Wealth Plus Plan Future Generali Care Plus Plan HDFC Click 2 Protect Plus Incomesurance Guaranteed Money Back Insurance Lifesurance Savings Insurance Childsurance Savings Protection Insurance Wealthsurance Suvidha Growth Insurance Termsurance Group Insurance Group Microsurance Loansurance Group Insurance Kotak Assured Income Accelerator Kotak Group Leave Encashment LIC Jeevan Rakshak Max Life Group Credit Life Secure PNB MET Traditional Employee Benefits Reliance Group Sarv Samriddhi Reliance Fixed Savings SAHARA Dhanvriddhi Jeevan Bima Unit-linked; Regular premium child plan. In case of death, lump sum benefit is paid out and the policy continues with the remaining premiums waived. Unit-linked; Single premium endowment plan. Traditional; non-participating money back plan that offers fixed guaranteed payments until maturity. Traditional; non-participating savings plan. It offers guaranteed additions of 10% of the annual premium during the premium payment term and offers an option to bring forward the maturity date during a pre-specified period that varies by policy term. Unit-linked; non-participating plan. Traditional; term assurance. Traditional; non-participating term assurance. Provides option to increase the sum assured during the policy term as well as extra life and regular income options. Traditional; non-participating guaranteed money-back plan with a 10 year term. Traditional; participating endowment plan. Traditional; participating endowment plan. It offers guaranteed annual pay-outs and an in-built waiver of premium. Unit-linked; endowment plan. Traditional; group term assurance Traditional; group micro-insurance plan with an option to attach accidental death rider to the product. Traditional; group decreasing term assurance Traditional; anticipated endowment plan. Unit-linked; group plan; offers leave encashment benefit on resignation or retirement of the employee. Traditional; participating endowment plan. Loyalty addition payable on death after completing five policy years or on maturity Traditional; single premium group term assurance. It offers death equal to outstanding debt amount. Traditional; fund based group variable insurance plan. Fund value is payable on resignation or retirement of the employee. Sum assured plus fund value payable on death. Traditional; non-participating group plan; regular premium plan with multiple premium payment and policy term options. Offers guaranteed addition of 2.5% per annum to the policy account every quarter. Traditional; non-participating endowment plan. Offers guaranteed additions as a percentage of the annual premium payable on death or beginning of last policy year. Traditional; non-participating single premium anticipated endowment plan. Star Union Dai-ichi Life Star Union Life Loan Suraksha Traditional; non-participating group plan. It is a single premium plan which pays death benefit to settle the outstanding debt amount. Note: 1. Source: company websites and press reports. 2. The numbers in [ ] represent the total number of products launched over the reporting period as per information sourced from company websites and press reports. 3. No information on product launches in the relevant period could be sourced from the above mentioned sources for AEGON Religare Life, Birla Sun Life, Canara HSBC OBC Life, Edelweiss Tokio Life, ICICI Prudential Life, IndiaFirst Life, Exide Life, SBI Life, Shriram Life and TATA AIA Life. Copyright 2014 Towers Watson. All rights reserved. towerswatson.com 10

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, India vivek.jalan@towerswatson.com Dilip Chakraborty Senior Adviser, Towers Watson, India dilip.chakraborty@towerswatson.com Kshitij Sharma Senior Consultant, Risk Consulting, India kshitij.sharma@towerswatson.com Kunj Behari Maheshwari Consultant, Risk Consulting, India kunj.maheshwari@towerswatson.com Mumbai 511/512, Solitaire Corporate Park Andheri-Kurla Road, Andheri East Mumbai 400 093 Tel: 91 (22) 4232 9900 Fax: 91 (22) 2837 0700 Gurgaon Unitech Business Park, Tower B, 2 nd Floor South City 1, Sector-41 Gurgaon 122 002 Tel: 91 (124) 432 2800 Fax: 91 (124) 432 2801 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 14,000 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 2014 Towers Watson. All rights reserved. towerswatson.com 11