Life Insurance Market Report - India
Magi Research, June 2011, Pages: 243
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 and government owned bodies, combining textual analysis, graphical comparisons and data:
- Life Insurance Penetration and Density
- Penetration and Density within Indian states
- Growth of the Life Insurance business
- Product segments, growth, comparisons and trends
- Distribution channels, growth, commissions, comparisons and trends
- Financial review, comparison and trends
- An in-depth five forces analysis of the competitive environment is included.
Why this report:
- Spot future trends and developments
- Make informed decisions
- Insightful analysis and in-depth industry coverage
- Save time on collating data and initial industry analysis
This report is an essential read for:
- CEO's and Senior Management in Life Insurance companies in India
- Companies seeking to enter the Indian market
- Senior Management at Banks, Insurance Brokers and Intermediaries
- Analysts and Researchers
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
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
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