insurance march 2014

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Among top insurance

markets

India ranked 10thamong 147 countries in the life insurance business, with a share of 2.03

per cent during FY13

The country ranked 19th among 147 countries in the non-life premium income, with a

share of 0.66 per cent in FY13

Rapidly growinginsurance 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

Source: Swiss-Re, IRDA, Mckinsey estimates

Note: * Figures for FY13 are provisional

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 marketrose 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


4/47

Growing demand

Source:IRDA

Notes: Estimate according to BCG, IRDA - Insurance Regulatory and Development Authority,

IPO - Initial Public Offering, FDI - Foreign Direct Investment

Strong demand

Growing interest in insuranceamong people; innovativeproducts and distribution channelsaiding growth

Increasing demand for insuranceoffshoring

Attractive opportunities

Life insurance in low-incomeurban areas

Health insurance, pensionsegment

Strong growth potential formicroinsurance, especially from

rural areas

Policy support

Tax incentives on insuranceproducts

Passing of Insurance Bill givesIRDA flexibility to frame regulations

Clarity on rules for insurance IPOswould infuse liquidity in the industry

Repeated attempts to make thesector more lucrative for foreignparticipants

Increasing investments

Rising participation by privateplayers has increased their market

share in the life insurance marketto 29.3 per cent in FY12 from 2per cent in FY03

Increase in FDI limit to 49 per centfrom 26 per cent, as proposed in2012, will further fuel investments

FY13

Market

size:

USD66.4

billion

CY20E

Market

size:

USD350 -

400 billion

Advantage

India


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6/47

Source: IRDA, Aranca Research

Note: Data as of March 2013

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

InsuranceRegulatory andDevelopment

Authority(IRDA)

Life

Insurance(24 players)

Non-Life

Insurance

(27 players)

Public (1)

Private (23)

Public (6)

Private (21)

Ministry ofFinance

(Government

of India)

Re-insurance

(1 player)Public (1)


7/47

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

With a share of 2.03 per cent, India stood 10thamong 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 201012

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

10%

14%

10%9%

8%9%

2% 2%

3%

0%

4%

8%

12%

16%

2010 2011 2012

India Emerging World

-2%

-10%-7%

11%

-5%

5%3%

-3%

2%

-12%

-8%

-4%

0%

4%

8%

12%

16%

2010 2011 2012

India Emerging World


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14.7 18.1 21.628.8

40.6

57.8 55.564.3

74.672.3

66.4

0.0

20.0

40.0

60.0

80.0

FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13

Non life insurance premium (USD billion)

Life insurance premium (USD billion)

Gross premiums written in India (USD billion)


The total insurance market expanded from USD14.7 billion

in FY03 to USD66.4 billion in FY13

Over FY03FY13, total gross written premiums increased at

a CAGR of 16.3 per centCAGR: 16.3%


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11.5

14.417.5 24.0

34.6

50.2 48.2

56.064.0 59.9

53.3

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

Growth in life insurance premiums (USD billion)

Source: Swiss Re, BCG, Aranca Research

The life insurance market grew from USD11.5 billion in

FY03 to USD53.3 billion in FY13

Over FY03FY13, life insurance premiums expanded at a

CAGR of 16.6 per cent

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

CAGR: 16.6%


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13.415.7

20.4

31.2

43.9 40.9

47.7 52.5 48.6

42.7

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13


Note: Life insurance density* is defined as the ratio of premium

underwritten to the total population in a given year

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)

CAGR: 13.7%

2.6

2.5

2.8

3.9

4.4

4.2

4.7

4.0

3.5

3.2

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13


11/47


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 (%)

Share of public and private sector in life insurance

segment (USD billion)

98.0% 2.0%

FY03

Size: USD11.5 billion


72.7%27.3%

FY13

Public Private

0 1 2 3 6 13 1417 19 18 1411

1417

21

28

37 34

39

4542

38

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

Private (USD billion) Public (USD billion)


12/47

Market share of major companies in terms of total

life insurance premium collected (FY13)


Notes: * - As of September 2013; Excluding reinsurer,

LIC - Life Insurance Corporation of India

Currently, the life insurance sector has 23* private players

compared to only four in FY02

LIC is still the market leader, with 72.7 per cent share in

FY13, followed by ICICI Prudential, with 4.7 per cent share

72.7%

4.7%

3.9%

3.6%

2.4%

2.3%1.8% 8.5%

LIC

ICICI Prudential

HDFC Standard

SBI Life

Bajaj Allianz

Max Life

Birla Sunlife

Others


13/47

Share of linked and non-linked insurance 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

The industry is witnessing a shift towards the traditional

non-linked insurance plans

The share of non-linked insurance increased from 59.1 per

cent in FY09 to 83.0 per cent in FY13

The non-linked premiums expanded at a CAGR of 16.1* per

cent to USD43.9 billion during FY09FY13

59% 57% 63%76% 83%

41% 44%37%

24%17%

FY09 FY10 FY11 FY12 FY13

Linked Premium Non-Linked Premium


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0.3 0.5 0.8 1.21.9 2.7 2.7

2.9 3.84.7 5.12.8 3.1 3.3

3.6

3.84.4 4.2 4.6

5.8

6.76.8

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

Private (USD billion) Public (USD billion)

4442

50 51

47

5767 68

7986

107

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13


Note: * - Growth rate in INR terms

The non-life insurance market grew from USD3.4 billion in FY04 to USD12.7 billion in FY13*

Over FY04FY13*, 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)

CAGR: 16.4*%

CAGR: 9.4%


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3.5 4.04.4 5.0

6.3 6.06.7

8.7

10.1 10.5

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13


The non-life insurance penetration rate was in the range of 0.60.8 per cent over 200413

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)

CAGR: 13.0%

0.67

0.63

0.61 0.63

0.63

0.61

0.660.66

0.73

0.78

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13


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Break-up of non-life insurance market in India

(FY13)


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

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

Total size: USD12.7 billion

43.2%

21.8%

9.8%

4.3%

3.6%

17.2%

Motor

Medical Insurance

Fire

Crop Insurance

Engineering

Miscellaneous andothers


17/47

57%43%

FY13

Public Private

0.5 0.8 1.2

1.9

2.7 2.7 2.9

3.8

5.05.5

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13*


Notes: * Figures for FY13 are provisional, ** Growth rate in INR terms

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

Growing share of private sector Non-life insurance premium of private sector

(USD billion)

CAGR: 33.1**%



85%

15%

FY04


18/47

Market share of major companies in terms of

Gross Direct Premium collected (FY13)


Note: Excluding reinsurer

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

Total size: USD12.7 billion

16.7%

13.0%

12.9%

9.5%8.6%

5.6%

4.6%

29.1%

New India

United India

National

Oriental

ICICI Lombard

Bajaj Allianz

AIC

Others


19/47

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

Notes: * - Figures for FY13 are provisional,

NBFC - Non Banking Financial Company, NGO - Non-governmental Organisation, EV - Embedded Value

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


20/47

Household and financial savings projections

Source: ICICI, RBI Annual Report, Aranca Research

Notes: Financial savings denote investment in equity and

debt instruments, E - Estimates

Indiasrobust 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

Financial savings are expected to grow to USD248 billion by

2015E from USD45 billion in 2000

89

306

369

540

2000

2010

FY13

2015E

Household savings(USD billion)

45

141

202

248

2000

2010

FY13

2015E

Financial savings(USD billion)


21/47

Indian residents shifting from low-income to high-

income groups

Source: McKinsey Quarterly, Aranca Research

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

1 3 72 6

1712

25

2935

40

32

50

2615

2008 2020 2030

Deprived (18412.8)

Million Household, 100%Income segment


22/47

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

201314

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 coverunorganised 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

Notes: RSBY - Rashtriya Swasthya Bima Yojana, FDI - Foreign Direct Investment

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


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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


24/47

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


25/47

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

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

Investments from the private sector are increasing, as they see a huge opportunity in the growing insurance sector ofthe country


26/47

Source: KPMG, Aranca Research

Note: TPA - Third Part Administrator

1999 2001 2006

CHANGE

IMPACT

IRDA cleared bill

Liberalisation of

sector and

formation of an

independentregulator

IRDA issues TPA regulations

Foreign players allowed to

enter with 26 per cent FDI cap

Entry of TPAs specifically

focussed on servicing health

insurance business

Entry of foreign players infusing

capital and technical expertise

IRDA insurancebrokers and

corporate agent

regulation

Thrust on

insurance

distribution

through corporateintermediaries

Entry of stand-alone health

insurance players

allowed

Entry of stand-

alone health

insurance players

2002


27/47

Source: KPMG, Aranca Research

Notes: IRDA - Insurance Regulatory and Development Authority, CVTP - Commercial Vehicle Third Party,

TP - Third Party, CV - Commercial Vehicle

2007 2011 2012

Creation of Indian

Motor Third Party

Insurance Pool

Mechanism to

equitably share CVTP

losses

Merger and

Acquisition

guidelines

Enabled

consolidation,

inorganic

transactions inthe industry

Introduction of

Declined Risk

pool, TP

premium

increase

Improvement

in overall

profitability of

the CVsegment

Price detariffication

Significant change inthe premium rates for

the commercial lines

CHANGE

IMPACT

2013

FDI cap raised

from 26 to 49per cent under

automatic

route by

cabinet

Cabinet

approval still

pending on

the FDI capincrease

2010

IRDA came

out with newguidelines for

equity-linked

insurance

products

Reduced the

first-year

agent

commission

and lock inperiod

extended


28/47

1.4

1.6

2.1

2.82.7

1.9

FY08

FY09

FY10

FY11

FY12

FY13

8.4

39.2

58.2

80.3

116.0121.9

FY08

FY09

FY10

FY11

FY12

FY13

Source: SBI Life Annual Report, IRDA, Company website, Aranca Analysis


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 Lifesprofits 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)

CAGR: 81.1*%

CAGR: 13.2*%


29/47

198.8

301.9

508.5

598.5

736.9

874.5

757.3

508.3

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

3.5

9.3 9.09.6

11.4

13.3

12.3

FY06

FY07

FY08

FY09

FY10

FY11

FY12

Source: Company Website, IRDA, Aranca Research


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)

CAGR: 24.9*%CAGR: 17.7*%


30/47

Objective for establishing microinsurance

Fulfilment of corporate social responsibility

Increase brand recognition to boost market entry

todaysmicro clients maybe tomorrows high-premium

clients

To target untapped markets and income groups of

rural India

The microinsurance business model

Source: Company website, Aranca Analysis

Key strategic decisions

The microinsurance business model must be

separated from business model

Selling microinsurance would require new, alternative

distribution mechanisms

New business unit

A special

microinsurance

team called theRural & Social

Team is formed

Partnering withNGOs

Identify and partnerwith credible NGOsoperating in the

local community

NGO suggestsgood agents formicroinsurancepolicies (micro-agents)

Forming CRIGs

A group of micro-agents called a

community ruralinsurance group(CRIG) is formed; itrelies on directmarketing ofmicroinsurancepolicies to localcommunitymembers

Local operationsmanaged by NGOs

Local operationslike collecting and

aggregating thepremiums, trainingmicro-agents, andhelping todistribute benefitslooked after by theNGO; this savesadministrativecosts for Tata-AIG


31/47


Robust growth in micro-insurance expected

Number of policies PremiumFirst year (FYP) and Renewals (RYP)

100,000

190,000

300,000

380,000 410,000

2008 2009 2010 2011 2012

400

900

1,800

2,400

2,800

0300

800

1,900

3,200

2008 2009 2010 2011 2012

FYP RYP



32/47

217 256 297 329 355111 111

133 159 142528 538

621778 850295 331

443

494512

254263

311

341327


Fire Marine Motor Health Miscellaneous and others

Gross Direct Premium (USD million)

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

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 Divisionaloffices 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 inIndia

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

CAGR: 16.5*%


33/47

4.04.5

5.6

7.6

9.2

FY09

FY10

FY11

FY12

FY13

816.6 723.8

967.4

1,117.7 1,182.1

FY09

FY10

FY11

FY12

FY13

Source: ICICI Lombard Annual Report, IRDA, Company website, Aranca Analysis

Notes: * - Growth rate in INR terms, ** - Figures for FY13 are provisional

ICICI Lombard GIC Ltd is a 74:26 joint venture between ICICI Bank Limited, Indiassecond 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)

CAGR: 23.4%

CAGR: 14.4*%


34/47

Source: Aranca Research

Opportunitiesfor Indianinsurance

market

Cropinsurance

Micro-insurance

Healthinsurancemarkets

Motorinsurancemarkets

Low-incomeurban andpensionmarkets


35/47

Urban low-income insurance penetration in India

Source: IRDA, Asia Insurance Review, Aranca Research

Note: E in the axis for the figures above refer to estimates

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

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

30%

40%

2007 2012E


36/47

Opportunity in the Indian pension and annuity

market

Source: McKinsey Quarterly, Aranca Research

Notes: PFRDA - Pension Fund Regulatory and Development Authority* Expected value, at 2009-10 rates

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 furtherprovide new opportunities to insurers

There is scope to introduce new-generation pension

products such as Variable Annuity and Inflation Indexed

Annuity

42

84

2010 2025E*

Indian retirement market (USD billion)

13%

87%

Formal pension systempenetration (2010)

Workerscovered

Workers notcovered

CAGR: 7%


37/47


Notes: E in the axis for the figures above refer to estimates, * - ACMA Estimates, GDP - Gross Domestic Product

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 1080 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)

2.8

0.7

9.09.2

2.3

32.0

CarProduction

Commercial 2&3 wheelers

2010 2020E

43.2%

21.8%

9.8%

4.3%

3.6%

17.2%

Motor

Medical Insurance

Fire

Crop Insurance

Engineering

Miscellaneous andothers


38/47

Health insurance penetration (million policies)

Source: McKinsey Quarterly, Annual Report IRDA, Aranca Research

Notes: * Growth rate in INR terms** Figures for FY13 are provisional

E - Estimate

Only 1.52 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 CAGRof 29.1* per cent

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

110

220

2005 2015E

CAGR: 8%


39/47

Population covered by health insurance (in million)

Source: Mckinsey estimates, Aranca Research

Notes: RSBY - Rashtriya Swasthya Bima Yojna,ESIC - Employees State Insurance Corporation

Introduction of health insurance portability expected to boost

the orderly growth of the health insurance sector

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

3513020

25

55

120

80

240

110

140

2010 2020E

Private insurance Govt employee insuranceESIC RSBYState insurance


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The business environment in Indias microinsurance sector supports healthy growth

Source: IRDA, McKinsey, Aranca Research

Macro level

(The enabling environment)

Intermediate level

(Support infrastructure)

Micro level

(Policy holders)

IRDA drafted microinsurance guidelines in 2010, which contain

numerous favourable measures such as

Lower threshold limits for agentscommissions

Rural areas must account for 7 per cent of new life insurance

policies in the first year of firmsoperation 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

The annual income growth rate in rural India is expected to increase

to 3.6 per cent over 201030 from 2.8 per cent during 19902010

About 5 million people currently have microinsurance, while the entire

market is expected to be in the range of 140300 million


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Number of Micro-insurance policies (in millions) New business premium (USD million)

Source: IRDA, McKinsey, Aranca Research

2.1 3.0 2.6 1.5

12.6

16.8 16.3

13.3

14.7

19.8 18.9

14.8

FY09 FY10 FY11 FY12

Private Public Total

8.4 5.1 5.7 4.3

43.9

79.3

57.9

43.7

52.3

84.4

63.6

48.0

FY09 FY10 FY11 FY12

Private Public


42/47

Crop insurance coverage

Source: Agricultural Insurance Company of India Annual report,

Department of Agriculture and Cooperation, IRDA, Aranca ResearchNote: * - Growth rate in INR terms

Crop insurance market in India is the largest in the world,

covering around 30 million farmers

Crop insurance accounted for nearly 5 per cent of the total

non-life insurance premium in FY12

To provide crop insurance to farmers, Government has

launched various schemes like National Agriculture

Insurance Scheme (NAIS), Modified National AgricultureInsurance 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 30million farmers out of 120 million are insured under crop

insurance schemes

Government of India plans to increase the coverage to 50

million during the 12thFive-Year Plan

18.4 19.223.9

17.6 16.7

0.4 1.2

0.7 0.4

2.49.3 11.7


Number of farmers covered (million)

NAIS MNAIS WBCIS

6.1 5.88.1 7.5 7.1

0.2 0.70.4 0.21.0 3.1

4.4


Sum insured (USD billion)

NAIS MNAIS WBCIS


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Insurance Regulatory and Development Authority (IRDA)

3rdFloor, Parisrama Bhavan, Basheer Bagh, Hyderabad500 004

Phone: 91-040-23381100

Fax: 91-040-66823334

E-mail: [email protected]

Life Insurance Council

4thFloor, Jeevan Seva Annexe Bldg. S. V. Road, Santacruz (W),

Mumbai400054

Phone: 91-22-26103303, 26103306

E-mail: [email protected]

General Insurance Council5th Floor, Royal Insurance Building, 14, Jamshedji TATA Road, Churchgate,

Mumbai400020

Phone: 91-22-22817511, 22817512

Fax: 91-22-22817515E-mail: [email protected]


44/47

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


45/47

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


46/47

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

Exchange rates (Fiscal year)

Year INR equivalent of one USD

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

Exchange rates (Calendar year)

Average for the year


47/47

India Brand Equity Foundation (IBEF)engaged Aranca to prepare this presentation and the same has been prepared

by Aranca in consultation with IBEF.

All rights reserved. All copyright in this presentation and related works is solely and exclusively owned by IBEF. The

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by electronic means and whether or not transiently or incidentally to some other use of this presentation), modified or in

any manner communicated to any third party except with the written approval of IBEF.

This presentation is for information purposes only. While due care has been taken during the compilation of this

presentation to ensure that the information is accurate to the best of Aranca and IBEFs knowledge and belief, the

content is not to be construed in any manner whatsoever as a substitute for professional advice.

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insurance march 2014

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