Basic Insights on Insurance and Banking sector in India - 2013

1. Insurance sector Overview
A Brief History Of The Market:-
Life insurance in the Indian market has been historically dominated by the government run Life
Insurance Corporation (LIC). The company was formed in 1956 by incorporating all 154 private life
insurance companies existing in the country at that time. However, following a strong wave of
development throughout the country, the Indian government allowed privatization in the insurance
industry in 2000, setting up the Insurance Regulatory and Development Authority (IRDA) to issue
licences to private life insurers. Foreign direct investment (FDI) was also allowed up to a limit of
26%, which meant that non-Indian entities were allowed to hold up to 26% of equity/share capital in
the Indian insurance companies.
As a result, 23 private companies, mostly joint ventures, entered the market. These companies include
PNB Metlife India Life Insurance, Tata AIG Life, DLF Pramerica Life Insurance (a joint venture between
Prudential Financial and DLF) and ICICI Prudential Life Insurance (a joint venture between British
insurer Prudential plc and ICICI). Following the de-nationalization, the life insurance industry took off.
From 2000 to 2011, new business premiums (NBP) grew by 28% while gross written premiums
increased by 25%. This growth propelled India into the list of the top 10 life insurance markets in the
world. In 2011, the country accounted for 2.5% of the life insurance premiums written worldwide.
, Indian insurance industry has remained in a good health and maintained absolute transparency and
highest standards of corporate governance. Assets under management (AUM) of the Indian insurers
are slated to touch Rs 20 trillion (US$ 376.51 billion) while the general insurance sector is anticipated
to grow 18 per cent in 2012-13, said J Hari Narayan, Chairman, IRDA. He further reported that the
insurance sector has grown substantially over the last few years, with its AUM from Rs 8 trillion (US$
150.57 billion) in 2008 to Rs 18 trillion (US$ 338.82 billion) in 2011-12.

2. Insurance companies in India
Company Approximate market
share
LIC 50%
ICICI 10%
SBI 5%
Bajaj 4%
Reliance 5%
HDFC 6%
Birla 4%
Max Life Insurance 3%
Tata 2%
Met Life 1%
Kotak 2%
Others 8%

4. GENERAL INSURANCE
Product Percentage
Engineering 4
Motor Own Damage 27.63
Motor Third party 14.94
Health 22.58
Aviation 1.08
Liability 2.4
Personal accident 2.63
Fire 10.91
Marine 5.97
Others 7.37
LIFE INSURANCE
Product Percentage
Non linked life individual 21.7
Non linked gen annuity group 4.33
Non linked gen annuity individual 0.85
Non linked pension group 4.22
Non linked pension individual 0.25
Non linked health 0.09
Linked insurance 55.01
Riders 0.01
Linked life group 13.54

5. Key findings
• a 60$ billion market in India majorly dominated by Govt run LIC , This is expected to grow by 120$
billion by 2019 helped by increase in foreign investment. Insurance premiums contribute around
3% of the country s GDP
• Growth potential is huge as less than a quarter of the 1 billion strong population is covered by life
insurance
• Asia accounts for more than 35% of the world’s life insurance premiums.India is one of the biggest
insurance markets in the world, accounting for 2% of the world’s and 6% of Asia’s life insurance
premium volume.
• Life insurance companies have registered a growth of 4 per cent in the first three quarters of
financial year 2012-13. The total premium collection from the individual segment by 24 life
insurers stood at Rs 40,688 crore (US$ 7.66 billion) in April-December 2012 as against Rs 39,131
crore (US$ 7.36 billion) in the corresponding period last year.
• Public sector insurer Life Insurance Corporation of India (LIC) recorded 11.3 per cent growth in the
retail segment, with collection of Rs 28,017 crore (US$ 5.27 billion) during April-December 2012
while private sector insurers' collection from individual segment stood at Rs 12,671 crore (US$ 2.38
billion).
• IRDA reported that insurance density came out be US$ 49 while insurance penetration stood at 4.1
per cent in 2011.
• The measure of insurance penetration and density reflects the level of development of insurance
sector in a country. While insurance penetration is measured as the percentage of insurance
premium to the gross domestic product (GDP), insurance density is calculated as the ratio of
premium to population (per capita premium).

9. Government Initiatives:-
IRDA has recently formed four working groups to standardise products offered by life
insurance companies, wherein the groups would consider unit-liked investment plans,
linked variable insurance plans, non-linked variable insurance plans and other non-linked
plans. Each group, with six members from life insurance companies along with an IRDA
representative, would focus on bringing uniformity in the designs of the products,
determining relevant parameters for each product and ensuring that these parameters are
aligned with IRDA stipulations. They would also mention the numerical range within which
the parameters could be allowed.
Alongside, IRDA has released an exposure draft to regulate opening of new centres by
insurance companies according to which, insurers who have completed 10 years of
business have to ensure that at least 25 per cent of the proposed new places of business
should be in places with population of 1,00,000 or below. The initiative would help to
enhance insurance penetration in the country. The regulator further added that insurers
may approach IRDA for any urgent proposals regarding opening of new branches in rural/
semi urban areas, anytime during the year in addition to the proposals submitted under
the annual Business Expansion Programme. Such proposals would then be considered on
merit.

10. • POTENTIAL - we estimate the life insurance premium volume from the Indian market at
$120 billion by 2019. This is based on the GDP growth forecast in a base scenario. In an
optimistic scenario, the average GDP growth rate is expected to be around 5.7%, and
assuming insurance penetration of 4.6%, this would lead to premium volume of $130
billion by 2019. [1] The average GDP growth rate is expected to be around 3.6% in a
pessimistic scenario, which would lead to a premium volume of $110 billion by 2019.
[1] In any case, India is a big market and has a huge potential for insurers like
Prudential, MetLife and Manulife. While we currently do not provide a separate
breakdown of India’s premium volume in our model, you can modify the interactive
charts below to gauge the effect a change in international market shares would have on
our price estimates for Prudential, MetLife and Manulife.
• ROAD AHEAD:-
• A World Bank study named 'Government-Sponsored Health Insurance in India: Are You
Covered?' has stated that India would have more than 630 million people covered
under health insurance by 2015. Over last five years, the government-sponsored
programs and schemes have significantly expanded the population covered by health
insurance in India and the newly launched schemes are introducing explicit
entitlements, improving accountability and leveraging private capacity, particularly with
an aim of reaching the poor.
• The study anticipates that by 2015, almost half of the country's population can be
covered with some form of health insurance wherein spending through health
insurance is likely to reach 8.4 per cent of total health spending, higher from 6.4
percent in 2009-10.

12. LATEST UPDATES :-• Allstate Corp, the second largest insurer in the US has inaugurated its first
technology and operations centre in Bangalore, India. The centre, an integral part of Allstate's global
value chain, is majorly a technology services centre serving in the areas of business intelligence,
analytics, testing and mobility. It will extend the Illinois-based company's technology infrastructure,
support a 24x7 operational work-flow and enhance technology and innovation capabilities.
• Metlife India is now PNB Metlife India after Punjab National Bank (PNB) picked up 30 per cent stake in
the life insurance company. Apart from PNB, MetLife India has two other banks, Karnataka Bank and
Jammu and Kashmir Bank as its distribution partners. At present, around 60 per cent of the business is
coming from bank channels and the company expects it to increase further over next few years.
Partnerships with the banks would also be fruitful as the business volume grows, said a spokesperson
from MetLife.
• Two of the insurance companies are planning to launch a specialised health cover for diabetic patients
in India. While Apollo Munich has already filed a diabetic cover policy document with IRDA, Religare
Health Insurance will soon submit documents for a similar cover with the regulator. Diabetes is an
epidemic in India (with around 61 million people having it) and insurance companies look at this as a
good business proposition. Unlike the existing health covers, which do not cover hospitals admissions
relating to complications of diabetes for up to four years, the proposed policies will cover diabetics from
day one.
• With a view to cover more and more Indians under the umbrella of insurance, public sector general
insurers are mulling expanding their operations to other countries in 2013-14. With a large number of
Indians and Indian businesses in South-east Asia, West Asia and Africa, these regions are emerging as
preferred destinations.
The four general insurers - New India Assurance, United India Insurance, Oriental Insurance and
National Insurance - are considering setting up more international centres. While Oriental Insurance
might hold stake in proposed reinsurance firm in Nepal, New India is looking to expand in Canada, Qatar
and Myanmar. United India Assurance is also looking at South East Asia and Middle East for expansion.
Moreover, LIC, GIC Re, four PSU general insurers are already holding stakes in Kenyan Insurance joint
venture (JV).

13. Strategy
• Create a USP and distinguished communication strategy

14. Media Spends
Insurance bharti axa birla sunlife icici prudential
Theme brand and monthly plan retirement plan children plan and life insurance
Spends(april-feb'13) 86 lacs 48k 72.8 lacs
properties india-aus tests EPL ind-eng test & ind-aus test
period Feb'13 Feb'13 nov12 and feb13
Insurance edelweiss hdfc max life
Theme brand children plans brand and corporate
Spends(april-feb'13) 56.4 lacs 4.1 lacs 1.52 cr
properties india-pak t20 & studio show hdfc life quiz non india,epl,tennis&cricket
period dec'12 jun--july12 round the year
Insurance sbi insurance met life LIC
Theme brand monthly income plan jeevan anand & corporate
Spends(april-feb'13) 30.90 lacs 35.38 lacs 90.42 lacs
properties studio show non india & f1 olympics on dd and HIL
period dec'12-jan'13 april-june'13 aug12 and jan'13

15. • Banking sector Outlook 2013:-
• With insurance sector combined , contributes 7 % in the GDP
• Three banks SBI(1) , HDFC(2) and ICICI(3) are the most valued banks
in India and stand in top 10 most valued companies in India
• Primarily revenue stream is interests earned from customers
• New age revenue stream is coming from chargeable services like
wealth management services , advisory,credit card , investment
banking and demat services
• 2011 census – 59% of population is banking in India , 40 % is still
not in reach – HUGE POTENTIAL
• RBI has not issued even ONE new bank license in last decade
• Law to issue new licenses is passed by Lok sabha and yet to clear
from Rajya sabha , once cleared , more foreign investments are
expected with more competition for the existing players , therefore
better value for customers
• Tap emerging markets in Asia & Africa - Oversees expansion in
agenda
• Mobile banking – Major technological leap