Life Insurance Scenario

in
India
Amit Gosain
- Research Associate

Agenda
Evolution of Life Insurance Sector
Entry of Competition and Evolution thereafter
Claims Ratio, Profitability, Assets under
Management of Various Companies
Distribution Channels
M&A in Life Insurance Sector
Wrong Doings
LIC Amendment Bill
Life Insurance Right business at the Right time

Basic Strategy of Competitors

Differentiate

To compete with a strong Brand Like LIC,

competitors need to show a difference
Without differentiating from us, they
cannot survive

Evolution
Year
1956
1969-70
1979-80
1985-86
2004-05

SA (Cr)
200
1000
2000
7000
180000

CAGR
12%
7%
23%
18%

Evolution
Post 1997, the interest rates started declining
13% in 1996 to 6% in 2003 making conventional
plans unattractive
Some companies started focusing on Term
Insurance plans
Guaranteed return plans withdrawn
During this time the Sensex started its climb.
Apr 2003 3000
Dec 2003 6000
Jan 2008 21000
Jan 2013 20000

 Private Players started aggressive marketing

showing the growth in NAV of their ULIPs in
comparison of the kind of products sold
traditionally by LIC
The general atmosphere in Economy was very
bullish and sensex continued to climb.
Many insurers did aggressive selling on ULIP front
promising astronomical returns based on the
performance since year 2003
Post 2009, the share of ULIP policies started to
decline

Evolution
Media also made lot of noise about the on going
mis-selling
2010 saw the SEBI-IRDA spat related to regulation
of ULIPs
IRDA came up with revised ULIP guidelines
effective Sept11
IRDA also came up with revised guidelines on
Variable Insurance Plans and draft guidelines on
many other issues.

Current Scenario
The life insurance sector has itself undergone a
makeover, offering

more choices
more products
tighter regulation and
greater awareness

Each player is trying to offer a variety of

products, better services and quicker claim
settlements; thus, making the environment
extremely competitive. Further, service standards
and products being more or less alike, creating a
differentiation is becoming extremely tough.

Current Strategy of Pvt Players

Differentiate from LIC
Experience

Selling (countering Mis-selling)

Servicing

LICI Zindagi ke saath bhi, Zindagi ke

Baad Bhi,
Na Chinta Na Fikar
Bajaj Allianz Jiyo Befikar
Max Aapke Sache Advisor

FIRST YEAR (INCLUDING SINGLE PREMIUM)

LIFE INSURANCE PREMIUM (Rs. Crores)

MARKET SHARE - FIRST YEAR (INCLUDING

SINGLE PREMIUM) LIFE INSURANCE PREMIUM

Life Insurance Penetration in India

(Ratio of Premium to GDP)

Year

Penetration

2001

2.15

2002

2.59

2003

2.26

2004

2.53

2005

2.53

2006

4.10

2007

4.00

2008

4.00

2009

4.60

2010

4.40

2011

3.40

Insurance Penetration in Select Countries

COUNTRY

South
Africa
United
Kingdom
France
Switzerland
United
States
India
Germany
Australia
Brazil
World

INSURANCE PENETRATION (%)

2010

2011

12.0

10.2

9.5
7.4
5.5

8.7
6.2
5.5

3.5
4.4
3.5
3.1
1.6
4.0

3.6
3.4
3.2
3.0
1.7
3.8

Insurance Penetration in Asian Countries

COUNTRY

Taiwan
Hong Kong
Japan
South
Korea
Singapore
World
India
Malaysia
Thailand
China
Bangladesh
Sri Lanka
Pakistan

INSURANCE PENETRATION (%)

2010
15.4
10.1
8.0

2011
13.9
10.1
8.8

7.0
4.6
4.0
4.4
3.2
2.6
2.5
0.7
0.6
0.3

7.0
4.3
3.8
3.4
3.3
2.7
1.8
0.7
0.6
0.4

Life Insurance Density in India

(Per Capita Premium)

Year

Insurance Density ($)

2001

9.1

2002

11.7

2003

12.9

2004

15.7

2005

18.3

2006

33.2

2007

40.4

2008

41.2

2009

47.7

2010

55.7

2011

49.0

Insurance Density in Select Countries

COUNTRY

Switzerland
United
Kingdom
France
Australia
United
States
Germany
South
Africa
Brazil
India
World

INSURANCE DENSITY ($)

2010
3666.8

2011
4421.0

3436.3
2937.6
1766.3

3347.0
2638.0
2077.0

1631.8
1402.2

1716.0
1389.0

854.6
169.9
55.7
364.3

823.0
208.0
49.0
378.0

Insurance Density in Asian Countries

COUNTRY

Japan
Hong Kong
Taiwan
Singapore
South
Korea
Malaysia
Thailand
China
India
Sri Lanka
Bangladesh
Pakistan

INSURANCE DENSITY ($)

2010
3472.8
3197.3
2756.8
2101.4

2011
4138.0
3442.0
2757.0
2296.0

1454.3
282.8
121.9
105.5
55.7
13.7
4.4
3.2

1615.0
328.0
134.0
99.0
49.0
15.0
5.0
4.0

CAGR (2001-2010)
Gross Premiums - Life
Countries

Growth Rate

Luxembourg, Poland, Slovak Republic

20-21

Czech Republic, Turkey, Portugal, Ireland

15-20

Hungary, Italy, Norway, Greece

10-15

Finland, Belgium, Korea, Canada, Japan,

Australia, Spain, Germany, Mexico, United States
Iceland, Switzerland, Netherlands, Sweden
France
India (LIC)

5-10
0-5
Negative
25.29 (20.44)
18

OPERATING EXPENSES
(AS % of Gross Premium underwritten)

2008-09

2009-10

2010-11

2011-12

LIC

5.76

6.58

8.34

7.35

PVT

25.99

20.86

18.11

17.53

INDUSTRY

11.65

10.85

11.30

10.34

MANAGEMENT EXPENSES RATIO

(Year ended 31.03.2012) (%age)
(Expense of Management to Gross Direct Premium)
LIC of India 14.27
Aviva 28.00
Aegon Religare
80.00
SBI Life 12.00
Met Life
25.00
Max Life
29.00
ICICI Prudential 18.60
HDFC Life
18.11
Reliance Life31.00
Bajaj Allianz 22.00
Canara HSBC
17.30
India First Life
16.71
Star Union Dai-Chi
17.00

Number of Offices
%age
Office
Offices

2009 2010 2011 2012

s
Closed
Close
d
ICICI Prudential 2102 1921 1402 990 1112 52.90
Aviva
224 186 142 135
89
39.73
TATA AIG
454 439 363 298 156 34.36
Max Life
705 705 504 464 241 34.18
HDFC Life
609 568 498 481 128 21.02
ING Vyasa
265 254 247 216
49
18.49
Bajaj Allianz
1164 1151 1092 1044 120 10.31
Kotak mahindra 198 215 203 205
10
4.65
LIC
3030 3250 3371 3455

PROFIT/LOSSES OF LIFE COMPANIES

For the Year (Fig in Crore)

LIC of INDIA

2007-08 2008-09 2009-10 2010-11 2011-12

845

957

1061

1172

1313

-1395

-780

258

808

1384

MAX NEW YORK Life

-157

-393

-21

194

460

BIRLA Sunlife

-445

-702

-435

305

461

ING Vyasa

-191

-195

-137

-70

-31

AVIVA

-202

-495

-345

29

74

HDFC Life

-244

-503

-275

-99

271

TATA AIG

-339

-565

-400

52

260

RELIANCE

-768

-1085

-283

-129

373

KOTAK Life

-72

14

69

102

203

-214

-71

542

1057

1311

ICICI Prudential

BAJAJ Allianz

23

PROFIT/LOSSES OF LIFE COMPANIES

( Fig in Crore)
2007-08 2008-09 2009-10 2010-11 2011-12
MET LIFE

21

15

25

25

33

SBI Life

34

-26

276

366

556

SAHARA Life

-18

36

28

29

SHRIRAM Life

-18

17

56

-242

-417

-478

-340

-190

FUTURE GENERALI

-30

-256

-357

-320

-130

IDBI FEDERAL

-26

-110

-105

-122

-70

RELIGARE AEGON

-24

-57

CANARA

-202

-246

-191

-89

DLF

-44

-93

-109

-128

SUDI

-19

-21

-28

-26

-45

-65

-73

BHARTI AXA

INDIA FIRST

Source: IRDA Annual Reports

24

CLAIMS REPUDIATION
(IRDA ANNUAL REPORT)
2008-09 2009-10
2010-11
2011-12
Aegon Religare
71.43
43.69
44.62
32.48
Aviva
19.33
14.41
12.23
9.55 (21.20)
Bajaj Allianz
8.35
7.30
7.08
6.28 (9.84)
Bharti Axa
44.83
31.58
12.58
10.80 (19.39)
Birla Sunlife
10.37
20.32 4.99 (11.79) 8.78 (18.92)
Canara HSBC
18.75
10.12
16.61
14.96
DLF Pramerica

1.08 19.51 (32.54)

16.74
Future Generali
30.00
34.53
21.53
27.15
HDFC Std
4.80
7.38
3.97
3.63 (8.43)
ICICI Prudential
5.20
4.42
3.14
3.16
IDBI Federal
5.13
18.58 21.00 (40.30)
27.59
India First

5.77
17.99
17.77 (25.17)
ING Vysya
7.81
5.33
3.53
5.24 (9.96)
25

CLAIMS REPUDIATION
(IRDA ANNUAL REPORT)
Company
2008-09 2009-10
2010-11
Kotak Mahindra
9.23
5.31
3.89 (7.59)
LIC
1.33
1.59
1.00
Max New York
7.77
14.35
14.90
Metlife
22.77
24.12
6.06
Reliance Life
5.67
15.27 8.66 (16.08)
Sahara
12.3
3.49
14.39
SBI Life
15.09
5.74
16.73
Shriram
24.27
23.53
25.87
Star Union Dai-chi

1.38
Tata AIG
27.78
15.92 17.07 (23.66)

2011-12
4.17 (18.87)
1.30
8.58 (12.47)
9.61 (13.53)
11.02 (19.16)
4.69 (9.09)
3.19
14.48
2.31
15.49 (25.75)

26

PERSISTENCY RATIO
(For the 13th month) (upto 31.03.2012)

LIC of India
Aviva
Aegon Religare
HDFC Life
India First Life
Star Union Dai-Chi
Canara HSBC
Bajaj Allianz
SBI Life
Met Life
Max Life
ICICI Prudential
Reliance Life

Policy
67.00
58.00
61.00
75.35
72.43
65.00
79.60
54.57
71.77
63.56
75.00
77.00
55.90

Annualised Prem
83.00
68.00
57.00
81.57
73.10
68.00

THE WORLD IS CHANGING

DEMOGRAPHIC SHIFT AGE, GENDER

CHANGING SOCIAL PATTERNS.
E-COMMERCE.
SHIFT FROM LONG TERM TO SHORT TERM
PLANS
CONVENTIONAL / ULIPS
ANNUITIES
HEALTH INSURANCE
PENSION PLANS
WORKING IN A REGULATORY REGIME

AGENCY STATISTICS
INDIVIDUAL AGENTS

2007 2008 2009 2010 2011 2012

Private 8.90 13.27 15.93 15.75 13.02 10.81
LIC 11.03 11.94 13.45 14.03 13.37 12.78
Industr
y
19.93 25.21 29.38 29.78 26.39 23.59
CORPORATE AGENTS

2007
Private 1906
LIC
409
Industr
y
2315

2008 2009 2010 2011 2012

2070 2091 2420 1870 642
345 415 510 295 240
2415 2506 2930 2165 882

PRODUCTIVITY OF AGENTS
(POLICIES SOLD)
INDIVIDUAL AGENTS

Private
LIC
Industry

200708
7
32
20

200809
6
28
16

200910
4
28
15

201011
4
26
15

201112
3
27
16

201011
1976
1708
1933

201112
2533
2194
2474

CORPORATE AGENTS

Private
LIC
Industry

200708
1798
1905
1815

200809
1857
2190
1908

200910
2289
1606
2172

PRODUCTIVITY OF AGENTS
(PREMIUM in lakhs)
INDIVIDUAL AGENTS

Private
LIC
Industry

200708
1.62
4.22
2.94

200809
1.10
3.10
2.02

200910
1.01
3.59
2.21

201011
0.99
3.75
2.34

201112
0.81
3.14
2.03

CORPORATE AGENTS
200708
Private 453.10
LIC
207.81
Industry 414.00

2008- 2009- 2010- 201109

10
11
12
443.79 492.59 594.82 399.55
232.84 235.62 313.42 444.90
411.21 448.84 550.36 403.84

LIC vis--vis Private Players

(FPI %age share through different Channels)

Private
Cos

LIC

F.Y

Tied
Channel

Banks

Other Corp
Agents

Brokers

Direct Selling
(Referrals)

2005-06

59.71

16.87

8.92

0.83

7.06

2006-07

65.80

16.58

8.41

1.05

6.77

2007-08

59.81

18.89

11.03

1.50

8.78 (7.79)

2008-09

54.94

20.78

10.92

2.00

11.37 (9.27)

2009-10

50.67

24.88

10.28

3.44

10.73 (7.85)

2010-11

46.89

33.21

8.70

4.77

6.24 (2.34)

2011-12

44.05

39.01

7.52

5.07

4.35 (0.16)

2005-06

98.37

1.25

0.32

0.06

2006-07

97.28

1.24

0.9

0.34

2007-08

98.16

1.30

0.29

0.05

2008-09

96.95

1.98

0.54

0.52

0.04

2009-10

97.30

1.92

0.41

0.10

0.21

2010-11

97.45

2.16

0.59

0.04

0.23 (0.12)

2011-12

96.56

2.57

0.22

0.04

0.62

Integration of Various
Distribution Channels (FPI in %)
CLIA

B&AC

Dir Mktg

Total

2010

5.97

2.64

0.06

8.67

2011

6.33

2.91

0.33

9.57

2012

7.57

4.20

0.91

12.68

 Distribution Channels
Business Correspondents
Online

M & A in Life Insurance

Max New York Life
Metlife
Bharti Axa
Reliance Insurance

LIC Amendment Bill

Raising of Capital
Opening of Branches
Sovereign Guarantee
Agents regulations
Distribution of Dividend

34

Assets under Management

(31.03.2012)
Life Fund

Pension & Unit Linked

Annuity Fund
Fund

Amt in
Crores

%age

Amt in
Crores

%age

LIC of
India

914614

93.84

212754

Private
Cos

60026

6.16

23913

Total

974620

100

236667

Amt in
Crores

%age

89.90 141703 38.30

1269070

80.26

10.10 228269 61.70

312188

19.74

1581259

100

100

Amt in
%age
Crores

Total

369972

100

35

Wrong Doings in Life Insurance

Industry

Penalties imposed by IRDA recently on

Met Life (76 Lakh)

20 lakh ULIP
5 Lakh Server hosted at USA
5 Lakh Distribution issues
30 Lakh Excess commission/charges paid
1 Lakh Group Insurance claim not settled
5 Lakh Erroneous payment to Axis Sales (subsidiary of Axis
Bank)
5 Lakh Wrong classification of Urban Business as Rural
Business
5 Lakh Long TAT in collection / accounting of premium from
rural areas

Wrong Doings in Life Insurance

Industry
SBI Life (6 Lakh)

5 Lakh Group Policy (Dhanraksha) There were two

premium paying options under this plan, single and 2
yrs. This 2 yrs was treated as regular premium and
commission rate of 40% on 1st Prem and 7.5% on 2nd
yr premium was payable. In the 2 yr term there was an
option of paying the 2nd yr premium with the 1st yr
premium with a discount of 4%. In more than 90% of
the cases the policy was sold in the 2 yr term (with
advance premium) without informing the
policyholders about the single premium option, where
the premium was quite low.
IRDA has not only penalized SBI Life, but also directed SBI
Life to remitt the difference of single premium and the 2 yr
term plan into policyholders account.
1 Lakh Other procedural deviances

Wrong Doings in Life Insurance

Industry
Kotak Mahindra Life (22 lakh)

1 Lakh Procedural Deviances

15 Lakh Excess commission paid
1 Lakh Violation of guidelines for claim payments
5 Lakh Violation of File & Use. Later changes made

Tata AIG Life (49 Lakh)

5 Lakh Violation of guidelines on Referral Entities, selling

by unauthorized persons
12 lakh Violation of guidelines on Specified persons, selling
by unauthorized persons
28 Lakh Excess commission/charges paid
4 Lakh Employees selling insurance on behalf of CAs

Wrong Doings in Life Insurance

Industry

Bajaj Allianz (5 lakh)

5 Lakh Group scheme Enrolled new members later

on also

HDFC Life (1.47 Crore)

1 Lakh Investment Norms not followed

35 Lakh Excess commission/charges paid
5 Lakh Accepted business from unlicensed entities
1 Lakh Violation of Group Insurance norms
1.05 Crore Refused death claims wrongly in housing
loan group schemes

Wrong Doings in Life Insurance

Industry

Shriram Life 28 lakhs

Birla Sun Life 1 Lakh
Max Life 5 Lakh
Sahara Life 12 Lakh
Future Generali 25 Lakh

Life Insurance Right

Business at the Right
Time