rsa final | krithagya
TRANSCRIPT
APPROACH SHIFTS- GENERAL INSURANCE INDUSTRY
Presented By:Krithagya ShahIMT-NagpurPGDM(2014-16)[email protected]
HISTORY
• Oriental Life Insurance Company,1818.
• 1870, Bombay Mutual Life Assurance Society became the first Indian insurer.
• 1956, Life Insurance sector and Life Insurance Corporation came into existence.
• 1971,General Insurance Corporation Of India.
• Late 90’s Insurance sector was reopened to the private sector.
Industry Phases
3
Phase Period Industry
Phase Ia. Life Insurance
b. General Insurance
1818 to 1956 (about 138 yrs)
1850 to 1972 (about 122 yrs)
Many (245) private sector companies only, competitive market.
Many (107) private sector companies only, competitive market.
Phase IIa.Life Insurance
b.General Insurance
1956 to 2000 (about 44 yrs)
1972 to 2000 (about 28 yrs)
Nationalization, public sector or State monopoly, only one company.
Nationalization, public sector monopoly, only one company with its four subsidiaries.
Industry Phases
Phase IIILife Insurance and General Insurance
After 2000 Opened to the entry of private domestic and foreign companies, mixed sector of public and private sector units, oligopoly of public sector companies (24 life insurance and 28 general insurance companies) 2014 Data
4
Phase Period Industry
Historical Developments in the General Insurance Industry
• The overall general insurance industry growth has kept pace with the GDP growth in the country and general insurance penetration has varied in a narrow band.
• The industry, in terms of gross direct premium, has grown from INR 11,446 crore in FY02 to INR 57,964 crore in FY12, which corresponds to a compounded annual growth rate (CAGR) of 17.6 percent.
• Insurance density, which is defined as the ratio of premium underwritten in a given year to the total population, has increased from USD 2.4 in 2001 to USD 10 in 2011.
Major Changes in the Insurance Industry
Shifts in General Insurance Industry
• Competition was reintroduced in 2000 with the licensing of the first private company that was ROYAL SUNDARAM ALLIANCE INSURANCE COMPANY.
• The intense competition brought about by deregulation has encouraged the industry to innovate in all areas, from underwriting, marketing, policyholder servicing, etc.
• Competition in a deregulated environment has allowed market forces to set premiums that are appropriate for exposures and push insurers to differentiate their products and services.
• Innovations in distribution and use of information technology have followed as public and private insurers compete to market their products.
7
De- Tariffing
• 1994 -- marine cargo, personal accident, health, banker liability and aviation.
• 2005-06 -- marine hull segment.
• 2007 - fire, engineering and motor own damage (OD) .
The only segment that remains under a tariff regime is the third party motor business.
8
De-Tariffing Timeline
1994-marine cargo, personal accident, health, banker liability and aviation
2005-06 -Marine hull segment
2007-Fire, engineering and motor own damage (OD)
9
Minimum Rates for Earthquake and STFI
• Excess was revised for property and engineering products.
• Minimum rates for STFI( Storm, tempest, flood and Inundation) and EQ were fixed occupancy and zone wise w.e.f 2012
10
Insurance Repository
• September 2013, IRDA launches 'Insurance Repository' services.
• Enables policy holders to buy and keep insurance policies in dematerialized or electronic form.
• Single account called electronic insurance account for policy holders.
• NSDL, Central Insurance Repository Limited , SHCIL Projects Limited, Karvy Insurance repository Limited, CAMS Repository Services Limited.
11
Role in Economy
• As now FDI investment limit has gone up to 49% from 26% earlier , hence better growth in terms of investment.
• According to IRDA, the insurance sector constitutes around 4.5 per cent to the GDP.
• The total premium collected was at Rs 2.83 lakh crore in 2013.
• Better percentage of GDP contribution is expected in future , due to high opportunities in the sector.
• Increasing health and self awareness in India which is leading to boom in the economy of the country.
12
Insurance Penetration
13
Insurance Density
14
Challenges
• The insurance penetration and insurance density levels are significantly lower than the developed as well as comparable developing countries which needs to be focused on.
• The under-penetration is driven by lack of overall financial awareness, lack of understanding of general insurance products and many more reasons which is a challenge for insurance Industry.
• The future in life insurance will be determined by the increase in pure protection products, a refreshing look at unit-linked plans, launch of customized plans, and improved service levels.
• The insurance sector will grow steadily rather than rapidly, the regulator’s challenge lies in monitoring compliance.
• Keeping in mind the complexities of the industry, multi-product, multi-channel, and multi- segment route needs to be followed for growth.
• Agents in the insurance sector are critical for its success and, in order to gain competitive advantage, quality people are needed but attracting and retaining agents is a challenge.
• There is general lack of transparency as financial and operational data for insurers are not readily available as none of India’s insurers are directly listed on stock exchanges .
15
Reasons for declining profitability
• Between FY06 and FY12, 10 new companies have entered the general insurance business. Intensifying competition and focus on growth by the new entrants led to competitive pricing pressure.
• Focus on growth by the insurers across the industry led to higher bargaining power of the intermediaries and limited control on the claims cost.
• Limited or no increase in the TP premium rates for a number of years coupled with issues pertaining to third party liability caps as under The Motor Vehicles Act, led to extraordinarily high claims ratio in the segment which impacted the overall profitability and solvency requirements for the general insurance companies.
• In India more than 45% people were living below poverty line and they could not even thing about the insurances.
• The insurance agents are not succeeding to that extent in motivating the people about insurances and insurance policies.
Future growth in the general Insurance Industry
• Insurance would assist business to operate with less volatility and risk of failure and provide for greater financial and societal stability from the growth pangs of an estimated growth rate over 8% in GDP.
• Study of global benchmarks reveals a strong correlation between GDP per capita and insurance penetration. The correlation suggests that the insurance penetration may increase up to 1 percent to 1.2 percent by FY20 considering the likely increase in the GDP per capita.
• Large private sector players would drive the focus on operational effectiveness, channel productivity, enhanced pricing approaches in order to derive profitable growth.
• Mid-sized private sector players may actively seek inorganic routes in order to rapidly gain scale and leverage synergies to create competitive pressure.
• Economic growth, socio-economic drivers, greater market penetration, rising prices of underlying assets, increase in healthcare costs would significantly drive the growth of the general insurance industry in the medium to long term.
• The general insurance sector is expected to grow at a CAGR of 16 percent from FY12 INR 57,964 crore to approximately INR 194,000 crore by FY20.
17
Inferences
• The industry has to adopt technology as we have to provide low cost solutions to a large volume which is the success formula for any business model in India. Use of technology in the industry exists but it is still dismal and has to improve.
• The solutions that we provide to the customer have to be very simple. It should be de-jargonized so that at the time of claims they do not have to face any difficulty. The scenario should be such that the customer knows exactly what they have got in a simple language.
• India continues to be a place where people prefer the personal experience of an agent explaining them about the policy. Agency system will definitely be there but it is still under penetrated. Distribution through agents has to move up.
• In addition to these low cost distribution solutions, increased reach in unrepresented areas is going to make a huge difference.
Introduction
• Microinsurance refers to insurance products which are designed to provide risk cover for low-income people. Generally, these products are focused towards providing adequate coverage to this customer segment with flexible payment schedules for the lower premiums .
• Microinsurance plan provides protection to individuals who have little savings and is tailored specifically for lower valued assets and compensation for illness, injury or death.
• Microinsurance is often found in developing countries, where the current insurance markets are inefficient or non-existent.
• Same general principle as ‘normal’ insurance.
• But different target group: The poor!
• Double benefit:
•New, untapped market for businesses
•Protection of the poor against risks: Vulnerability
20
Global Overview
• The last decade witnessed strong growth in the microinsurance sector worldwide with emergence of three strong growth regions – Asia, Latin America and Africa .
• The growth in Asia, which accounts for roughly 80 percent of the global microinsurance market, is driven by large and dense populations, interest from public and private insurers, penetration of distribution channels and active government initiatives.
• Insurers are increasingly making an effort to cover the population by introducing need-based and easy-to-understand products. In Central and Eastern Europe, growth in microinsurance has not been as swift as compared to Asian and Latin American regions.
• The microinsurance business took its roots in India with a few schemes launched by non government organizations (NGOs), micro finance institutions (MFIs), trade unions, hospitals and cooperatives to create an insurance fund against a specific peril.
• The Government of India formed a consultative group on microinsurance in 2003 to look into the issues faced by the microinsurance sector .
• To support the growth and potential of this sector IRDA came up with Micro Insurance regulation in 2005.
22
Microinsurance in India
Microinsurance in India
23
Microinsurance Players and products in Inidia
S.No. Name of Insurer Name of the product
1 Aviva life ins. Co. India Pvt. Ltd. Grameen Suraksha
2 Bajaj Allianz Life Insurance Co. Ltd Bajaj Allianz Jana Vikas Yojana. Bajaj Allianz Saral Suraksha Yojana. Bajaj Allianz Alp Nivesh Yojana.
3 Birla Sun life ins. Co. LTD
Birla Sun Life Insurance Bima SurakshaSuper.Birla Sun Life Insurance Bima Dhan Sanchay.
4 DLF Pramerica Life Insurance Co. Ltd DLF Pramerica Sarv-Suraksha.
5 ICICI Prudential Life Insurance Co. Ltd ICICI Prud. Sarv Jana Suraksha
6 IDBI Fortis Life Insurance Co. Ltd. IDBI Fortis Group Micro insurance Plan
Microinsurance Players and products in Inidia
S.No. Name of Insurer Name of the product
7 ING Vysya Life Insurance Co. Ltd. ING Vysya Saral Suraksha
8 Life Insurance Corporation of India LIC's Jeevan Madhur. LIC's Jeevan Mangal.
9 Met Life India Met Vishwas
10 Sahara India Life Insurance Co. Ltd. Sahara Sahayog (Micro Endowment Insurancewithout profit plan).
11 SBI Life Insurance Co. Ltd. SBI Life Grameen Shakti.SBI Life Grameen Super Suraksha.
12 Shriram Life Insurance Co. Ltd. Shri Sahay.Sri Sahay (AP).
13 Star Union Dai-ichi Life Insurance Co. Ltd. SUD Life Paraspar Suraksha Plan .
14 TATA AIG Life Insurance Co. Ltd.
Ayushman Yojana.Navkalyan Yojana.Sampoorn Bima Yojana.Tata AIG Sumangal Bima Yojana.
Distribution Channels
• Distribution of microinsurance products is dependent on factors such as collaboration, relationship and trust with the low-income group while holding down associated costs.
• MFIs, NGOs, Regional Rural Banks, Self-help groups (SHGs) and their federations and cooperatives are the most-preferred distribution channels led by their vast established networks and proximity to the target market.
• The selection of the right channel mix primarily depends on the region and product segment. In India and the Philippines, MFIs are predominately being used to distribute microinsurance products, while, in Brazil, utility and telecom companies are increasingly being used.
• However, insurers are continuously innovating and introducing distribution channels that are not only cost efficient but also have a wider reach. Technology is being extensively used to distribute microinsurance products more efficiently and effectively.
Microinsurance Regulations, 2005
• The regulation provides definitions of life and non-life microinsurance product on individual or group basis. The contracts covered included term, endowment, health, personal accident, hut, livestock and tools or instruments.
• Created a new distribution intermediary called the microinsurance agent and formalised the role of NGOs, MFIs) and SHGs that had access and experience in working with low income groups for at least 3 years. A micro finance agent is allowed to work with one life and one non-life insurer.
• Eliminated the need of a qualifying exam to become a microinsurance agent and lowered training requirement from 100 hours to 25 hours in the local language thereby simplifying the recruitment process. However, this also translates into more push-based sales as opposed to a need-based sale.
• Allowed for the bundling of life and non-life elements in one single product, thereby paving way for greater collaboration between life and non-life insurers.
Products
• Life micro insurance Covers not only the loan amount, also includes funerals benefits for the policyholder and family member sometimes.
• Health micro insurance Coverage against till health and maternity for direct and indirect medical costs.
• Disability micro insurance Linked with death cover in personal accident products.
• Agriculture micro insurance Aims at protecting farmers from seasonal variability
28
Challenges
Un-Insured Target Customer• Low product awareness• Aversion to purchase of an
intangible asset.• Perception of insufficient
benefits.• Product not suitable for
specific strata or business needs.
• Time for claim settlement too long as compared to the urgency when required.
Distribution Intemediary• Lack of sufficient incentives
to cover operations cost.• Lack of training and
understanding of product fitment to customer needs.
• Risk of losing respect in the local community if the insurer does not honour a claim.
Insurance Company• High transaction cost against
low ticket size.• Poor documentation (such
as Identity card, age, address proof)
• Largely un-banked target customers.
• Lack of actuarial data for risk analysis and pricing.
• High distribution and transaction expenses.
• Limited health infrastructure in rural areas, makes health insurance difficult to sell.
Potential Solution to scale up Microinsurance business in India
• We Need to create grievance channels and a resolution system appropriate for low income policy holders.
• Regulating new channels for distribution and mandating risk carriers which are unregulated or under other authorities to become licensed.
• A microinsurance pool, enabled by the pooling together of all revenues accrued through initiatives run by insurance companies, the Government, postal services amongst others. Payment of claims will be managed by the pool based on information stored in smart cards or mobile phones.
• The need to reduce operating costs in microinsurance will drive a model that includes shared infrastructure and a shared database. By itself, it will allow insurers to amortise costs, but linked to the microinsurance pool, it will have significant impact on reducing costs.
• An increasing number of the Indian population will be connected to wireless networks – either as telecom subscribers or through embedded devices (smart cards, biometric devices, embedded identification tags etc.) This will lead to the generation of massive amounts of segment specific data, enabling a sharper focus on product development for the target market.
• Leveraging off recent initiatives by the Central and many State Governments like issuance of smart cards to the ‘poorest’ Indians to keep track of financial payments and health records.
Market development for Microinsurances
31
Access to Financial Services
32
Number of Microinsurance Providers
33
Microinsurance- Total Lives Covered
Region Life Health Accident & Disability
Property & Index
Americas 7,545,057 445,876 105,000 600
Africa 2,036,141 3,053,778 1,603,000 1,600,000
Asia 54,158,332 31,697,038 39,180,508 34,557,434
Total 63,739,530 35,196,692 40,888,508 36,158,034
34
How many people do different providers reach
35
Facts & Figures
36
Facts & Figures
37
Roadmap for the future
• Looking at the unattended need for insurance among low-income and rural segments, there is a huge scope for growth of the microinsurance sector.
• The ticket size in micro insurance is very small and therefore the per-policy costs applicable to mainstream insurance would just not work out. Hence, insurers need to invent/innovate new ways of reducing the same.
• Latest technological innovations have revolutionized the way operations are conducted in the financial sector especially in rural areas. Insurers too can benefit by deploying latest technology such as premium collection on hand-held devices connected to insurers through internet; payments and service requests over mobile phones; logging-in proposals and uploading claims and servicing requests on the net; to economize and expand their operations.
• Eligibility for micro insurance agency is now limited to Micro Finance Institutions (MFIs), Self-Help Groups (SHGs) and Non-Governmental Organisations (NGOs). Since these entities are not active in vast portions of the country, there is a need to expand the scope of micro insurance agency to enable a balanced and faster growth of micro insurance in the country. Sale of across-the-counter micro insurance products in grocery/street-corner stores can be considered.
• Insurance can also be embedded into various items frequently purchased by rural/low-income communities such as farm equipment, seed, fertilizer/pesticide, televisions, mobile phones/services, motors/pumps, loans, deposits and mortgages.
Inferences
• Insurers must strive to understand the customer’s changing needs and adapt their products and services accordingly, continually improving the cost-benefit ratio for clients.
• Regulators must promote a development agenda for inclusive insurance markets, finding the right balance between protecting consumers and expanding access.
• Policymakers need to create an enabling environment that includes the necessary infrastructure for providing microinsurance.
• Social organizations, including employers’ and workers’ organizations, cooperatives, NGOs and other associations can play a critical role in organizing workers in the informal economy who lack access to social protection or other types of microinsurance.
• Lastly, the billions of poor people who do not have a formal way of coping with risk must respond positively to the efforts of providers and regulators in accepting a culture of insurance and its capability to provide financial freedom, security and well-being.
40
THANK YOU