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Life Insurance Market Report - India Product Image

Life Insurance Market Report - India

  • ID: 1839253
  • June 2011
  • Region: India
  • 243 Pages
  • Magi Research

FEATURED COMPANIES

  • Aviva Life Insurance
  • Bharti Axa Life Insurance
  • Birla SunLife Insurance
  • HDFC Life Insurance
  • ING Vysya Life Insurance
  • Kotak Life Insurance
  • MORE

The Indian life insurance sector has grown at a fast pace since liberalisation in 2001. The insurance sector has faced many challenges after the initial period of high growth. The life insurance market has been in a state of constant change driven by regulatory changes, increasing competition, a shifting distribution landscape and capital constraints since 2008-09. New business growth has slowed as companies focus on profitable growth. In this environment, decision makers need clear insights and analysis on the factors shaping the market and how competition is evolving.

The Life Insurance Market Report is an essential resource for analysis of the life insurance sector in India. The report covers data and analysis on the Life Insurance, Health, Pensions and Micro Insurance markets.

Scope:

- India and its economic reforms process
- Regulatory framework and summary of key regulations
- Economy prospects and performance
- Population and demographics
- Life Insurance market review and
- Competitive landscape

Highlights:

The life insurance market review provides an insightful analysis and comparison among the top 10 private sector companies READ MORE >

FEATURED COMPANIES

  • Aviva Life Insurance
  • Bharti Axa Life Insurance
  • Birla SunLife Insurance
  • HDFC Life Insurance
  • ING Vysya Life Insurance
  • Kotak Life Insurance
  • MORE

Executive Summary

Country Background

Maps

Asia Political Map

India – States and Union Territories Map

India and Neighbouring Countries – Physical Map

Country Information

Key Datelines

Economic Reforms in India

Datelines for key economic reforms

People and Demographics

Population

Demographics

Households

Labour force by occupation

Unemployment Rate

Personal Income

High Savings Rate

Economy

Contribution to GDP

Industrial Production (IIP)

Fiscal Deficit

Inflation

Policy & Interest Rates

Foreign Exchange Reserves

Foreign Direct and Portfolio Investment

Balance of Payments

Currency

Stock Market Performance

Governance and Legislation

Governance

Constitution of India

Government

Parliament

Political Environment

Legislation

Legal System

Business legislation

Insurance Act, 1938 and IRDA Act, 1999

Regulatory structure

Financial Stability and Development Council

Insurance Regulatory and Development Authority (IRDA)

Tariff Advisory Committee

The Insurance Institute of India

Life Insurance Council

Insurance Ombudsmen

Summary of Regulations

Pension Funds Regulatory and Development Authority (PFRDA)

Reserve Bank of India (RBI)

Indian Currency

Exchange Control under FEMA:

Operations by Foreign Companies

Foreign Direct Investments

Securities and Exchange Board of India (SEBI)

Initial Public Offer

Taxation

Corporate

Individuals

Direct Tax Code

Proposed Financial Reforms

The Pension Fund Regulatory and Development authority Bill, 2011

Insurance Bill -The Insurance Laws (Amendment) Bill, 2008

Minimum Common Standards for Financial Advisors

Pension & Social Security

Pension & Social Security Schemes

Employee State Insurance Act, 1948

Employee Provident Fund and Miscellaneous Provisions Act, 1952

Payment of Gratuity Act, 1972

Workmen's Compensation Act, 1923

Maternity Benefit Act, 1961

Voluntary Schemes

Contribution Limits

Tax on Social Security Schemes

Contribution under Employee Provident Fund Scheme:

Contribution for Public Provident Fund

Contribution to New Pension Scheme

Interest Income on EPF and PPF

Withdrawal from Employee Provident Fund

Withdrawal from Public Provident Fund

Payment of Gratuity

Benefits under Employee State Insurance Act

Healthcare Sector

Disease and Illness

Healthcare Expenditure

Healthcare Infrastructure

Health Insurance

Life Insurance Industry

History of Insurance in India

Background

Life Insurance Industry Background

Market Size and Growth Rates

Penetration and Density

State level penetration and density

Industry Growth and Performance – State Level

Tax Savings

In Summary

Life Insurance Industry Analysis

Market Share

Product Trends

Individual and Group Business

Individual Business

Group Business

Assets under Management

Distribution Channels

Individual Agents

Bancassurance

Corporate Agents

Insurance Broker

Independent Financial Advisors

Direct Sales

Direct Sales Force

E-commerce and Online Sales

Web Aggregators

Referral or Database sharing

Channel Share of Business

Group Business

Individual Business

Commission Trends

Single Premium – Commissions

Regular Premium - Commissions on First Year Premiums

Regular Premium – Renewal Commissions

Financial Review

Conservation Ratios

Operating Expenses to GWP

Profitability

Capital

Solvency

In Summary, Competitive Analysis

Direct Rivalry among Competitors

Threat of Entrants

Pressure from Substitutes

Customers Bargaining Power

Suppliers Bargaining Power

Summary of Opportunity

Future Outlook

Micro-insurance in India

Background

Current Landscape

Regulatory

Products

Distribution

Business Volumes

List of Appendices

Appendix 1: Regulations governing Life Insurance Companies

Key Legislation

Key IRDA Regulations

Appendix 2: Issued Share Capital for Life Insurance Companies

Appendix 3: Datelines Life Insurance Companies Licenses

Appendix 4: Total Life Insurance Premium

Appendix 5: First Year Life Insurance Premium

Appendix 6: New Business Premium by Product Segment

Appendix 7: New Business Policies by Product Segment

Appendix 8: Individual New Business Premium – by Distribution Channel

Appendix 9: Individual New Business by State

Appendix 10: Individual Business – Growth Rates by State

Appendix 11: Assets under Management – Life Insurance Companies

Appendix 12: Assets under Management for Life Insurers by Fund Category

Appendix 13: Claims

Appendix 14: Profit After Tax – Life Insurance Companies

Appendix 15: Individual Agents – Life Insurance Companies

Appendix 16: Corporate Agents – Life Insurance Companies

Appendix 17: Number of Branches & Offices – Life Insurance Companies

Appendix 18: Commission Payments

Appendix 19: Operating Expenses to Gross Written Premiums

Appendix 20: Conservation Ratios – Life Insurance Companies

Appendix 21: Directory of Regulatory Bodies in India

Appendix 22: Directory of Life Insurance Companies

Appendix 23: Directory of Reinsurance Companies in India

Appendix 24: Directory of Insurance Brokers in India

Appendix 25: Glossary

List of Figures

Figure 1 - Asia Political Map

Figure 2 - India States & Union Territories

Figure 3 - India Physical Map

Figure 4 - Population Growth

Figure 5 – Male & Female Life expectancy at birth

Figure 6 – Population Growth by Age Group

Figure 7 - Labour Force Occupation

Figure 8 - GDP per Capita

Figure 9 - Domestic & Household Savings

Figure 10 - Top 10 economies by GDP - PPP

Figure 11 - GDP Growth Factor Cost

Figure 12 - India GDP - Rs. and USD

Figure 13 - Export contribution to GDP

Figure 14 - GDP Components by Sector

Figure 15 - Index of Industrial Production - Growth

Figure 16 - Fiscal Deficit

Figure 17 - Inflation - WPI & CPI

Figure 18 - Policy Interest Rates

Figure 19 - Foreign Currency Reserves

Figure 20 - Foreign Direct & Portfolio Investment

Figure 21 - Rs. / USD & Rs. /GBP currency rates

Figure 22 - NSE Nifty 2000-2011

Figure 23 - BSE Sensex 2000-2011

Figure 24 - NSE Market Capitalization 2000-2011

Figure 25 - Life Insurers - Indian Promoter Category

Figure 26 - Life Insurance Industry Size - GWP

Figure 27 - Life Insurance Premium – GWP

Figure 28 - Life Insurance Premium CAGR

Figure 29 - New Business Premiums – GWP

Figure 30 - New Business Growth

Figure 31 - New Business Growth WPI

Figure 32 - Life Insurance Penetration & Density - India

Figure 33 - Comparison of Life Insurance Penetration - Global Markets

Figure 34 - Life Insurance Penetration, New Business and Total Premiums

Figure 35 - Comparison of Life Insurance Density - Global Markets

Figure 36- State Share of Individual NB – Premium

Figure 37 - State Share of Individual NB - Policies

Figure 38 - India States - Market Share Map

Figure 39 - Individual New Business Growth - State wise Performance

Figure 40 - %age share of Annual New Business for Q4 (JFM)

Figure 41 - New Business Market Share LIC vs. Private. Sector

Figure 42 - New Business Market Share 2009-10

Figure 43 - New Business Market Share 2010-11

Figure 44 – Change in NB Market Share – Industry level

Figure 45 – Change in NB Market Share – within Private Sector

Figure 46 - Industry Growth and Market Share

Figure 47 - Private Sector Growth and Market Share

Figure 48 - Total Industry Product Segments - New Business

Figure 49 - New Business - Individual & Group - 2009-10

Figure 50 - New Business - Individual & Group - 2010-11

Figure 51 - Individual Business Market Share - Private Sector and LIC

Figure 52 - Product Segments - Individual Business

Figure 53 - Individual New Business - Premium

Figure 54 - Individual New Business - Policy

Figure 55 - Linked & Non Linked New Business Premium

Figure 56 - New Business Linked vs Non Linked

Figure 57 - Individual Life Insurance, New Business

Figure 58 - Individual Life Insurance, Average Premium

Figure 59 - Individual Pension - New Business

Figure 60 - Pension Average Premium

Figure 61 – Individual Annuity - New Business

Figure 62 - Individual Annuity - Average Premium

Figure 63 - Individual Health - New Business

Figure 64 – Individual Health - Average Premium

Figure 65 - Group - New Business Market Share Private. Sector and LIC

Figure 66 - Group New Business - Product Segments

Figure 67 - Group New Business - Share by Premium

Figure 68 - Group New Business - Lives Covered

Figure 69 - Group Business – Life Insurance

Figure 70 - Group Business - Pension

Figure 71 - Group Business - Annuity

Figure 72 - Assets under Management

Figure 73 – LIC and Private Sector AUM

Figure 74 - Private Sector - Top 5 Company by AUM

Figure 75 - Number of Individual Agents

Figure 76 - Channel Share of Group Business – Industry

Figure 77 - Channel Share of Group Lives - Industry

Figure 78 - Channel Share of Individual New Business - Industry

Figure 79- Channel Share of Individual NB - Private. Sector

Figure 80 - Channel Share of Individual NB - LIC

Figure 81 - Individual New Business, Average Premium by Channel

Figure 82 - Channel Share of Individual New Business

Figure 83 - First Year Commissions – LIC and Private Sector

Figure 84 – First Year Commissions - Top 5 Private. Sector

Figure 85 - First Year Commissions - Private. Sector (Select Others)

Figure 86 - Renewal Commissions – LIC and Private Sector

Figure 87 - Renewal Commissions – Top 5 Private. Sector

Figure 88 - Renewal Commissions - Private. Sector (Others)

Figure 89 - Conservation Ratios – LIC and Private Sector

Figure 90 - Conservation Ratio - Top 5 Private. Sector

Figure 91 - Conservation Ratios - Private. Sector (Others)

Figure 92 - Conservation Ratios (Private Sector) compared to NB Market Share

Figure 93 - Opex / GWP Trending

Figure 94 - Opex to GWP Ratios

Figure 95 - Opex to GWP - Yearly Trending - Top 6

Figure 96 - Opex to GWP - Yearly Trending - Others

Figure 97 - Market Share and Profitability Comparison

List of Tables

Table 1 – Projected Life Expectancy at Birth

Table 2 - Rural & Urban Households

Table 3 - Rural & Urban Employment & Unemployment

Table 4 - Savings and Investments as % of GDP

Table 5 - Household Savings Growth

Table 6 - Structure of Interest Rates

Table 7 - Foreign Exchange Reserves

Table 8 – Foreign Direct & Portfolio Investment

Table 9 - Balance of Payments

Table 10 - Investment Allocation - Life Controlled Funds

Table 11 - Investment Allocation - Pension Controlled Funds

Table 12 - Obligations to Rural & Social Sector

Table 13 - Corporate Tax Rates

Table 14 - Individual Tax Rates

Table 15 - Tax Rebates for Individuals

Table 16 - Contribution limits for social security schemes

Table 17 - Child Mortality and Life Expectancy

Table 18 - Disease and Illness in India

Table 19 - Healthcare Expenditure

Table 20 - Public Spending on Healthcare in India

Table 21 - Healthcare Infrastructure

Table 22 - Life Insurance Companies - Partners

Table 23 - Total Life Insurance Premiums – USD

Table 24 - Total Life Insurance Premiums – Rs

Table 25 - New Business Premiums - USD

Table 26 - New Business Premiums - Rs.

Table 27 - Life Insurance Penetration & Density for Indian States

Table 28 - Share of Q4 (JFM) to Annual New Business

Table 29 - Premium Analysis - New Business and Renewals

Table 30 - Minimum Capital Requirement for Insurance Brokers

Table 31 - Derived Profitability of Life Insurers

Table 32 - Capital Invested by Life Insurers

Table 33 - Solvency Ratio of Life Insurers

FEATURED COMPANIES

  • Aviva Life Insurance
  • Bharti Axa Life Insurance
  • Birla SunLife Insurance
  • HDFC Life Insurance
  • ING Vysya Life Insurance
  • Kotak Life Insurance
  • MORE

The first decade of the 2000's was a boom time for the life insurance industry in India. After the first private sector companies were licensed in 2001, the life insurance industry sprinted towards high growth at a CAGR of 25% between 2001-2010; reaching a size of USD 56 billion in total premium income for 2009-10. Life insurance sales grew at a CAGR of 29% over the 10-years 2001-2011; reaching USD 28 billion in new business premiums for 2010-11.

Strong economic growth, rising incomes and booming equity markets led to increasing amounts of savings into financial instruments. Life insurance companies developed extensive branch networks, recruited large number of agents and developed alternative channels such as Bancassurance to aggressively push unit-linked products. The number of life insurance agents increased to 2.97 million by March 2010.

Slowing down:

The slowdown of 2008-09 punched a large hole in insurers' plans as they were forced to deal with increasing costs, low agency productivity, high lapses and surrenders.

Capital constraints emerged as international companies focused on strengthening their balance sheets. Capital efficiency became the focus area, resulting in a pruning of operating and distribution costs.

Many agency led life insurers pruned their sales forces and inactive or unproductive agents were terminated. Branch networks for many insurance companies were rationalised, and unproductive branches closed.

Equity markets poor performance combined with rising customer dissatisfaction over high product charges resulted in an increase in lapses and surrenders. The IRDA introduced new regulations to regulate insurance intermediaries, reduce charges on unit-linked products and reduce the sale of linked products as short-term investments.

After a decline in new business in 2008-09, the life insurance industry has resumed on the growth path with new business sales growing at a CAGR of 19% from 2008-09 to 2010-11. However, many Life Insurance companies posted negative new business growth in 2009-10 and 2010-11. Cost cutting measures resulted in operating expenses reducing significantly across all private sector insurers.

Potential for Life Insurance remains strong, with some risks to growth:

Life Insurance Penetration has increased to 4.6% of GDP, but density remains fairly low. Life Insurance has been mainly a savings led business, helped by tax advantages, and protection remains a small, although growing segment.

Demographics in India remain favourable for long term growth of the life insurance and pensions sector. India is poised for a demographic dividend as its young population enters the workforce. High economic growth of over 8% GDP, increasing per capita income and a traditionally high savings rate is an ideal environment to attract long term savings.

An increasing trend towards nuclear families and the breakdown of traditional family support structures will increase the need for savings and protection plans. At the same time, increasing life expectancy and reducing traditional support systems will increase the need for pension savings.

The Indian life insurance sector has an advantageous tax regime that provides tax deductions and exemptions at the contribution, earning and maturity stages for life insurance policies. Investors will continue to see life insurance as an attractive tax advantageous investment, provided that tax regulations do not change to remove some of these benefits.

Emerging Profitable Growth:

Life Insurance industry growth has slowed but profits are starting to emerge. Four private sector insurance companies declared profits for the year 2009-10 and many are close to breaking-even.

Capital requirements among insurers have reduced significantly. Reduced upfront charges and commissions on unit-linked products are likely to increase capital efficiency further.

Commissions on linked products have reduced significantly and it has become a challenge to retain distribution. Insurers with lower operating expenses are in an advantageous position to attract and retain distribution; and to maintain higher margins. Consequently, Insurers will need to continue focusing on operating efficiencies.

The product changes of 2010 resulted in a shift from unit-linked regular premium products to traditional regular premium and unit-linked single premium products. Some of these shifts seem to be tactical in nature, at the cost of long term profitability. The shift to traditional products was driven by higher commissions that can be paid on traditional products.

A number of distribution initiatives are visible among life insurers, including the emergence of specialist direct sales forces and an e-commerce channel. Bancassurance is becoming an increasingly important channel. Competition to secure long-term arrangements, including via equity participation is likely to increase as companies try to secure distribution reach.

As profits emerge, the challenge going forward for insurers is to achieve profitable growth. The challenge for life insurers is on continuing to increase operating efficiencies and reduce costs, rebuild a profitable product portfolio and create a balanced, sustainable distribution model.

Industry Consolidation:

Capital constraints, slower growth and difficulties in building effective distribution have resulted in many promoters evaluating options to either bring in an additional partner who brings distribution, or to exit the sector.

Under Indian regulations, promoters are required to dilute their stake to 26% after 10 years of operations. Many insurers are now reaching this mark. Foreign promoters are still awaiting the passage of the Insurance Bill which would allow them to increase their stake in the Indian venture to 49%. Many Indian companies are planning to make an IPO, draft guidelines for which have been issued by the IRDA.

In the past 2 years, the trend to dilute promoter stakes for distribution partnerships has caught on. Max New York Life has entered into an agreement to sell 4% stake to Axis Bank, at par value, in return for a long-term distribution agreement. Aviva, Bharti Axa and MetLife are in competing discussions to partner Punjab National Bank, where the Bank will take a stake in the life insurer.

Bharti Axa Life and Bharti Axa General Insurance companies have been the first to see a complete exit from its Indian promoter, Bharti Enterprises, which has sold its 74% stake in the two insurers to Reliance Industries.

Over the next few years, this trend in consolidation is likely to continue.

Future Outlook:
In the short term, Magi Research expects muted growth as life insurers adjust their product mix and distribution channels to deal with loss of sales from regulatory changes to pension plans and unit-linked plans. Insurers will continue to focus on improving profitability as some prepare for making public offer of shares.

Over the period 2011-15, the report expects the life insurance industry to benefit from the growth drivers of higher savings and demographics and continue to grow at a CAGR of 12%-18%. Downside risks remain from regulatory changes to traditional products; and changes to tax advantages offered to life insurance savings. Changes that facilitate the return of market linked pension plans by insurers offer the potential to resume a slightly higher rate of growth.

- Aviva Life Insurance
- Bajaj Allianz Life Insurance
- Bharti Axa Life Insurance
- Birla SunLife Insurance
- Canara HSBC OBC Life Insurance
- Future Generali Life Insurance
- HDFC Life Insurance
- ICICI Prudential Life Insurance
- India First Life Insurance
- ING Vysya Life Insurance
- Kotak Life Insurance
- Life Insurance Corporation
- Max New York Life Insurance
- Met Life Insurance
- Reliance Life Insurance
- SBI Life Insurance
- Star Union Dai-ichi
- Tata AIG Life Insurance

Note: Product cover images may vary from those shown

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