MBM-414

INDUSTRIAL ANALYSIS
PROJECT
INSURANCE INDUSTRY

PRESENTED BY- Neelima Garg

167694
MBA INT.
1
2
 INDEX-
S.NO. TOPICS

1. INTRODUCTION, DEVELOPMENTS- HISTORICAL & PRESENT

2. PRESENT POSITION & FUTURE PROJECTIONS

3. INVESTMENT AVENUES

4. CHALLENGES

5. GROWTH DRIVERS

6. GOVT. INITIATIVES & FAVOURABLE CHANGES

7. INSURANCE COMPANIES PROFILE

3
 MEANING

Insurance is a form of contract or agreement under which one party

agrees in return for a consideration to pay an agreed amount of

money to another party to make good for a loss, damage or injury, to

something of value in which the insured has a pecuniary interest as a

result of some uncertain event.

4
 INTRODUCTION
•The insurance industry of India consists of 53 insurance companies of which 24 are in
life insurance business and 29 are non-life insurers.
•Among the life insurers, Life Insurance Corporation (LIC) is the sole public sector
company. Apart from that, among the non-life insurers there are six public sector
insurers. In addition to these, there is sole national re-insurer, namely, General
Insurance Corporation of India (GIC Re). Other stakeholders in Indian Insurance
market include agents (individual and corporate), brokers, surveyors and third party
administrators servicing health insurance claims.
•Out of 29 non-life insurance companies, five private sector insurers are registered to
underwrite policies exclusively in health, personal accident and travel insurance
segments. They are Star Health and Allied Insurance Company Ltd, Apollo Munich
Health Insurance Company Ltd, Max Bupa Health Insurance Company Ltd, Religare
Health Insurance Company Ltd and Cigna TTK Health Insurance Company Ltd. There
are two more specialised insurers belonging to public sector, namely, Export Credit
Guarantee Corporation of India for Credit Insurance and Agriculture Insurance
Company Ltd for crop insurance.
5
DEVELOPMENTS IN
INSURANCE SECTOR-

6
FUNCTIONS OF INSURANCE

PRIMARY FUNCTION SECONDARY OTHER FUNCTIONS-

FUNCTIONS-

• Certainty. • Assist government.

• Capital • Social security.
• protection Creation.
against • Tax Saving.
economic loss. • Improves
• Rural Development.
efficiency.
• Risk sharing.
• Economic
Progress.

7
HISTORICAL
DEVELOPMENTS-

8
NATIONALIZATION OF GIC-1976

TARIFF ADVISORY
COMMITTEE-1968

NATIONALIZATION
OF LIC-1956

INSURANCE ACT-
1938

9
INSURANCE LAWS AMENDMENT BILL-2015

ESTABLISHMENT OF IRDA-1999

R.N. MALHOTRA COMMITTEE-

1993
PUBLIC LIABILITY
INSURANCE ACT-
1991

10
•2000:
IRDA starts giving licenses to private
insurers: ICICI prudential and HDFC
Standard Life insurance first private
insurers to sell a policy.
•2001
: Royal Sundaram Alliance first non
life private insurer to sell a policy
•2002:
Banks allowed selling insurance
plans. As TPAs enter the scene,
insurers start setting non-life claims
in the cashless mode
•2007:
First Online Insurance portal,
https:/// set up by an Indian
Insurance Broker, Bonsai Insurance
Broking Pvt. Ltd
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RECENT
DEVELOPMENTS

12
MAJOR REVOLUTION IN
INSURANCE SECTOR-

INSURANCE LAWS
AMENDMENT BILL 2015

13
MAJOR FEATURES OF THE DETAILS- EFFECT-
BILL-
FOREIGN REINSURERS PERMITTED TO OPEN CREATION OF
ALLOWED BRANCH UNDER SECTION COMPETITIVENESS IN
27- E OF IRDA REINSURANCE FIELD
FDI INCREMENT FROM 26% TO 49% FOREIGN STAKE WILL
INCREASE
OPENING UP OF CAPITAL GOVT. INSURERS CAN INCREASE IN CAPITAL OF
MARKET TO GOVT. NOW RAISE CAPITAL PUBLIC INSURERS
INSURERS FROM PUBLIC
INSURANCE AGENTS UPTO Rs. 1 CRORE FINE LESSENING OF
FINED FOR MIS-SELLING FOR CUSTOMER- GRIEVANCES
MIS-SELLING OF
PRODUCTS
SELF REGULATING BODIES LIFE INSURANCE COUNCIL INCREASING REGULATION
& GENERAL INSURANCE WILL RESULT IN EFFECTIVE
COUNCIL OPERATIONS
HEALTH INSURANCE CAPITAL REQUIREMENT EASE IN ESTABLISHING
REDUCED TO Rs. 50 HEALTH INSURANCE
CRORES COMPANY

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15
 NEW INTERMEDIARIES-

-ONLINE DISTRIBUTION
-BROKERS
-DIRECT SELLING AGENTS
-CORPORATE AGENTS: NBFCs
-DEALERS
-BANK ASSURANCE
-INSURANCE
- MANUFACTURERS ADVISORS(PREVIOUSLY
-TPAs
CALLED AGENTS)

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 Break up of total life insurance queries across
locations*
It is estimated that by 2020 2%
8%
4%
1%

three in every four insurance 7%

policies would be influenced by

34%

online channel
83%

60%
It is estimated that
insurance sales through
online channel will grow 2009 2013

20x from now by 2020 Metros >10 lakh town 5-10 lakh town < 5 lakh town

Source: BCG, Gartner

Notes: * - Non rural locations, top 500 cities
only
**Based on exchange rate of USD1 = INR60.28, IT
– Information Technology
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PRODUCT INNOVATION-

18
PMSBY PMFBY PMJJBY RSSY

19
 SURAKSHA
PMSBY PMJJBY BANDHAN
DRIVE

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INSURANCE REPOSITORIES- An Insurance O
Repository is a facility to help policy holders T
buy &keep insurance policies in electronic H
form rather than paper document. Such E
policies are called “e-policies” R

PMFBY- The Pradhan Mantri Fasal Bima P

Yojana is a new crop damage insurance R
O
scheme that has been approved by the Union
D
Cabinet in January 2016. The scheme covers U
kharif, rabi crops as well as annual C
commercial and horticultural crops. T
S
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PMSBY- It is an accidental death & disability
insurance scheme which can be availed by
paying nominal premium of Rs. 12/- per person
per year, he or she will get an insurance cover
for a sum of Rs. 2,00,000/- (two lakh) in case of
accidental death or permanent full disability or a
sum of Rs. 1,00,000/- (one lakh) in case of partial
but permanent disability. The scheme will be
valid for a year and it can be renewed every year.

22
Rashtriya Swasthya Suraksha Yojana, or National
Health Protection Scheme (NHPS), a new
nomenclature for the Rashtriya Swasthya Bima
Yojana (RSBY). Under the NHPS, the finance minister
announced a cover of Rs.1 lakh per family. An
additional cover of Rs.30,000 was announced for
senior citizens.

PMJJBY-It is basically a term life insurance policy that

can be renewed either on a yearly basis or for a
longer period of time. It will provide life insurance
coverage on the death of the policyholder.

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NEW
SEGMENTATION-

24
NON LIFE
INSURANC
E

HEALTH
INSURANCE

25
SPECIALISED INSURERS

-AGRICULTURAL INSURANCE CO. – PART OF

PUBLIC INSURERS

-ECGC: FOR CREDIT INSURANCE.

-HEALTH INSURANCE COMPANIES: WORKING

INDEPENDENTLY AS STAND ALONE
INSURANCE COMPANIES.

26
 2016-17 2015-16
Gross Net U/W Net Net U/W Net
Gross
Direct earned Profit / incurred earned Profit / incurred
Direct
STAND ALONE Premiu premium( Loss claim premium Loss claim
Premium
m (Rs Rs in (Rs in ratio (Rs in (Rs in ratio
HEALTH (Rs in
in Crores) Crores) Crores) Crores)
INSURANCE Crores)
Crores)
COMPANIES
2 3 4 5

1 6 7 8

Star Health and Loss

Allied Insurance 1469 1017 N.A. 63.96% 1091 675 147 67.21%

Apollo Munich Loss

803
Health Insurance 655 N.A. 60.03% 692 543 85 65.59%

Max Bupa Health Loss

372
Insurance 315 N.A. 55.16% 309 238 158 59.07%

Religare Health N.A. Loss

275
Insurance 154 61.13% 152 N.A. 94 79.92%

Cigna TTK Loss

21
Health Insurance 6 N.A. 64.33% .34 N.A. 62.74 N.A.

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PRESENT POSITION

FUTURE PROJECTIONS

INVESTMENT AVENUES

28
 PRESENT
POSITION-
The Confederation of Indian Industry states that the
insurance sector of the country has been witnessing
a consistent growth rate of late and its present
worth is 41 billion US dollars.

India currently accounts for less than 1.5 per cent of

the world’s total insurance premiums and about 2
per cent of the world’s life insurance premiums

The country is the fifteenth largest insurance market

in the world in terms of premium volume
.
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The general insurance business in India is currently at
Rs 78,000 crore premium per annum industry and is
growing at a healthy rate of 17 per cent.

India’s life insurance sector is the biggest in the world

with about 360 million policies which are expected to
increase at a Compound Annual Growth Rate (CAGR) of
12-15 per cent over the next five years.

During April 2017 to March 2018 period, the life

insurance industry recorded a new premium income of
Rs 1.38 trillion (US$ 20.54 billion), indicating a growth
rate of 22.5 per cent

The general insurance industry recorded a 12 per cent

growth in Gross Direct Premium underwritten in April
2018 at Rs 105.25 billion (US$ 1.55 billion).
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31
The total market size of the insurance sector in India is projected to
touch US$ 350-400 billion by 2020.

life insurance sector is expected to increase at a Compound Annual

Growth Rate (CAGR) of 12-15 per cent over the next five years.

The insurance industry plans to hike penetration levels to five per cent
by 2020.

The country’s insurance market is expected to quadruple in size over

the next 10 years from its current size of US$ 60 billion
the life insurance market is slated
References: Media Reports, Press
Releases, Press Information Bureau,
to cross US$ 160 billion over the
Union Budget 2017-18, Insurance next 10 years.
Regulatory and Development Authority
of India (IRDA)
Note: as per ASSOCHAM Report 2018
32
.
MAJOR INVESTMENTS-

•Quest Global, a pure-play engineering and Research and

Development (R&D) services provider, has raised investment of
around Rs 2,396 crore (US$ 351.54 million) from leading global
investors Bain Capital, GIC and Advent International for a minority
stake in the company.

•Foreign Direct Investment in the insurance sector stood at US$

341 million in March-September, 2017, showing a growth of 152
per cent compared to the same period last year.

•Insurance firm AIA Group Ltd has decided to increase its stake in
Tata AIA Life Insurance Co Ltd, a joint venture owned by Tata
Sons Ltd and AIA Group from 26 per cent to 49 per cent.

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•Bennett Coleman and Co. Ltd (BCCL), the media
conglomerate with multiple publications in several languages
across India, is set to buy Religare Enterprises Ltd’s entire 44
per cent stake in life insurance joint venture Aegon Religare
Life Insurance Co. Ltd.

•GIC Re and 11 other non-life insurers have jointly formed the

India Nuclear Insurance Pool with a capacity of Rs 1,500 crore
(US$ 220.08 million) and will provide the risk transfer
mechanism to the operators and suppliers under the CLND
Act.

•State Bank of India has announced that BNP Paribas Cardif is

keen to increase its stake in SBI Life Insurance from 26 per
cent to 36 per cent. Once the foreign joint venture partner
increases its stake to 36 per cent, SBI’s stake in SBI Life will
get diluted to 64 per cent.
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•Canada-based Sun Life Financial Inc plans to increase
its stake from 26 per cent to 49 per cent in Birla Sun Life
Insurance Co Ltd, a joint venture with Aditya Birla Nuvo
Ltd, through buying of shares worth Rs 1,664 crore (US$
244.14 million).

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CHALLENGES & GROWTH
DRIVERS-

36
37
 -RURAL REGION
-UNEDUCATED
-UNEMPLOYED

KEY CHALLENGES

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 Perceived performance and
expected performance- CUSTOMER
SERVICE ISSUE

Perceived Comparison Expected

performance performance

P>E P<E
P=E
Positive Negative
disconfirmation disconfirmation
Confirmation

Satisfaction Dissatisfaction
Neutral

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GROWTH DRIVERS

40
MICRO
INSURANCE

41
 11% Fire
15%
5% MOTOR INSURANCE LEADS IN
Marine NON-LIFE INSURANCE
22% Motor

Health
47%

Others

Vehicle production in India* (million units)

30.2

16.6

-2021 10
ESTIMATED
3.2 2.4
-2013 0.8
42
Car Production Commercial 2&3 wheelers
 HEALTH INSURANCE
From 13.3 per cent of the total
non-life insurance premium in Health insurance penetration (million
policies)
FY07, health insurance
currently contributes 20.2 per 220
cent CAGR: 33.2%

124

Total health insurance

premiums increased from
USD733.1 million in FY07 to 2013 2015

USD2,573 million in FY13 at a Source: McKinsey Quarterly, Annual Report IRDA, Aranca Research
Notes: E - Estimates, *Growth rate in INR
CAGR of 27.1* per cent terms, CAGR - Compound Annual Growth Rate

Health insurance reported

18.66* per cent growth in
gross premiums in FY13
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 GROWTH IN MICRO-INSURANCE

Number of micro-insurance policies (‘000) New business premium* (USD million)

3,827 4,340 39

1,985 2,951
30
1,541

611 999 700 794 696

21
FY09 FY10 FY11 FY12 FY13 FY09 FY10 FY11 FY12 FY13

Private Public Private Public

4 5 4
1 0

2 1

Source: IRDA, McKinsey, Aranca Research

Note: * - Premium is group
premium
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SAVINGS
STIMULATE
INSURANCE-

45
 Household and financial savings projections
India’s robust economy is expected to
sustain the growth in insurance Household Financial savings
premiums written savings (USD billion)
Higher personal disposable incomes (USD billion)
36 20
would result in higher household savings 9 2 248

that will be channeled into different 3 14

540 1
financial savings instruments like 0
45
insurance and pension policies
89 6

FY13
2000

2010

200

201

FY1
2017

2017
Household savings are expected to grow

3
E

E
to USD540 billion by 2017E from USD89
billion in 2000 Source: ICICI, RBI Annual Report, Aranca
Research Notes: Financial savings denote investment in equity and
Financial savings are expected to grow debt instruments,
E - Estimates
to USD248 billion by 2017E from USD45
billion in 2000

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A rising number of young professionals are opting for health
insurance& motor insurance.

Indian residents shifting from low-income to high- income groups-

Million Household, 100%
15
26 Income segment
50
Deprived (<1657)
32

Aspirers (1657-
3682.5)
40 Seekers (3682.5 -
9206.4)

Strivers (9206.4-
29
35 18412.8)
Globals
1 3
25 (>18412.8)
17
12 2
6 7

2008 2020 2030

Growing affluence of the middle class

The emergence of an affluent middle class is

triggering demand for both life and non-life Source: McKinsey Quarterly, Aranca
Research
personal insurance lines 47
GOVT. INITIATIVES &
FAVOURABLE CHANGES-

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GOVT. INITIATIVES

49
FAVOURABLE
CHANGES-

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The Central Government is planning to launch an all-in-one
insurance scheme for farmers called the Unified
Package Insurance Scheme (Bhartiya Krishi
Bima Yojana). The proposed scheme will have various
features like crop insurance, health cover, personal
accident insurance, live stock insurance, insurance cover
for agriculture implements like tractors and pump sets,
student safety insurance and life insurance

India's insurable population is anticipated to touch 750

million in 2020 which is a boom for insurance.

References: Media Reports, Press Releases, Press Information

Bureau, Union Budget 2016-17, Insurance Regulatory and
Development Authority of India (IRDA)
Note: - Assocham Report 2016

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 The IRDA has recently taken away the tariffs of the
interest rates and this has provided insurers greater
independence when it comes to deciding the price of
their insurance policies.

The Insurance sector in India is expected to attract

over Rs 12,000 crore (US$ 1.76 billion) in 2018 as many
foreign companies are expected to raise
their stake in private sector insurance joint ventures

References: Media Reports, Press Releases, Press Information Bureau,

Union Budget 2017-18, Insurance Regulatory and Development Authority of
India (IRDA)
Note: - Assocham Report 2017

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 OTHER CHANGES:

• Insurance products are covered under the exempt, exempt, exempt

Tax (EEE) method of taxation. This translates to an effective tax benefit of
incentives approximately 30 per cent on select investments (including life
insurance premiums) every financial year

• The proposed Insurance (Amendment) Bill is expected to empower

IRDA to introduce regulations for promoting sustainable growth,
Union Budget providing the flexibility to frame regulations and increase the FDI limit
2013–14 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 • IRDA recently allowed life insurance companies that have completed
companies 10 years of operations to raise capital through Initial Public Offerings
allowed to go (IPOs)
public • 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 will help companies raise capital and fund their
increase in FDI expansion plans Notes: RSBY - Rashtriya Swasthya Bima Yojana, FDI - Foreign Direct Investment
limit and revival • Revival package by government will help companies get faster product
package clearances, tax incentives and ease in investment norms
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54
COMPANIES PROFILE

55
 UIIC
• United India Insurance Company Limited (UIIC) is fully owned by the
Government of India. The company offers general insurance services in
the fire, motor, health and miscellaneous segments. UIIC has a network
of over 2,133 branches across the country, with its head office in
Chennai. The company had over 61,650 active agents as on March 31,
2017. The company is one of the leading general insurers in India with
a market share (on GDP basis) of 12.4% as on March 31, 2017. During
FY2017, the company reported GDP of Rs. 16,062.8 crore as compared
with Rs. 12,250.4 crore in FY2016. It reported underwriting losses of
Rs. 4,444.6 crore and a net loss of 1,912.6 crore in FY2017 as compared
with underwriting losses of Rs 2,215.6 crore and net profit of 220.8
crore in FY2016.
• During H1FY2018, the company reported GDP and underwriting loss of
Rs. 7,680.0 crore and Rs. 1,311.8 crore respectively. 56
 INCORPORATION-18 TH FEBRUARY,1938
NALIZAT2.

TOTAL OFFICES –
HEAD NO . OF
1,992(INCLUDIN EMPLOYE
QUARTERS-
G ES- 16,345
CHENNAI
1 VIRTUAL
OFFICE
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 REFERENCES & BIBLIOGRAPHY-
IRDAI
IBEF
moneycontrol.com
CII
EY(GLOBAL ORGANISATION)
ASSOCHAM
ARANCA RESEARCH
GENEVA ASSOCIATION (INTERNATIONAL
ASSOCIATION FOR STUDY OF INSURANCE ECONOMICS)

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