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Developments in Indian Life Insurance Industry

16th December 2010, Kochi

Agenda
Snapshot of Indian Life Insurance Industry Inclusive Growth of Life Insurance Sector

Investment by Life Insurance Companies Expenses of Life Insurance Companies

Protection of Policyholders Interest

Snapshot of Indian Life Insurance Industry


Life Insurance Industry completes a decade of opening up. Currently there are 23 players in the Life Insurance Industry. 20 Insurance companies have JV s with foreign partners. LIC, Reliance Life Insurance and Sahara Life Insurance company are the three companies who do not have JV s. All the major international players are present in the Indian Insurance market. A high capital intensive industry-Rs. 30,396 Cr deployed.
(As of 30th Sept 2010)

 Foreign partners have brought in capital of Rs.5053 Crs as FDI.


(As of 31st March 2010)

India has the largest in-force policies in the world.


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Snapshot of Indian Life Insurance Industry


Parameters FY 99-00 FY 07-08 FY 08-09 FY 09-10

.contd

Apr-Sep 2010
(provisional)

Number of players Capital Deployed (Rs. Cr) Branches Employees (in Lacs) Individual Agents (in Lacs)

1 5 2,048 1.23 7.14

18 16,692 8,913 2.54 25.20

22 24,988 11,815 2.85 29.37

23 28,943 12,018 2.70 29.78

23 30,396 11,837 2.62 27.60

 More than 72 % of branches are located in Class C cities or lower

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Source: IRDA, Life Insurance Council (Apr-Sep 10 data is provisional)

Snapshot of Indian Life Insurance Industry


Parameters FY 99-00 FY 07-08 FY 08-09

....contd Apr-Sep 2010


(provisional)

FY 09-10

New Business Policies (In Cr) In force Policies (In Cr) New Business Premium (Rs.Cr) Renewal premiums (Rs. Cr) Total Premium (Rs. Cr)

1.69

5.08

5.09

5.32

2.00

10.14

25.76

29.60

30.40

31.22

8,299

93,713

87,331

1,09,894

62,450

17,951

1,07,639

1,34,454

1,55,556

62,805

26,250

2,01,351

2,21,785

2,65,450

1,25,254

As per IRDA guidelines Life Insurance Companies have to mandatorily sell 18%policies in rural areas.

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Source: IRDA, Life Insurance Council (Apr-Sep 10 data is provisional)

Snapshot of Indian Life Insurance Industry


Parameter FY 99-00 FY 07-08 FY 08-09

..contd
FY 09-10

India s share of world premium (Life) Penetration as % of GDP New Business Policies (In Cr)

0.50%

1.83%

1.98%

2.45%

1.77%

4.0%

4.0%

4.60

1.69

5.08

5.09

5.32

In force Policies (In Cr)

10.14

25.76

29.6

31.89

The industry services largest number of life insurance policies in the world

Source: IRDA

Snapshot of Indian Life Insurance Industry


Benefits Paid
Parameter FY 06-07 FY 07-08 FY 08-09 FY 09-10

..contd

Apr-Sep 2010
(provisional)

Total Death Benefit paid(Rs.Cr) Total Maturity claim paid(Rs. Cr) Total Benefits paid (Rs.Cr)

4,794

5,288

6,125

8,385

4,937

34,356

34,543

37,806

NA

NA

56,887

61,686

58,527

95,883

64,742

Source: IRDA, Life Insurance Council (Apr-Sep 10 data is provisional)

Agenda

Inclusive Growth of Life Insurance Sector

Inclusive growth of Life Insurance Sector


 Companies are statutorily required to do rural business and cover lives from social sector rural, un-organized and socially underprivileged from there first year of operation.  Companies have to mandatorily sell
18% of new policies in rural areas. Cover 25,000 lives in social sector every year.

 2.8 Crore rural policies were sold by companies in last two years. (1.55 Crore policies in 2007-08 and 1.26 Crore policies in 2008-09)  3.36 Crore life's covered in social sector in last two years. (1.43 Crore in 2007-08 and 1.93 Crore in 2008-09)  72% of the total 12,018 branches of insurance companies are in semi-urban or rural areas (33% in rural areas).  No such obligations for Mutual Funds which operate mostly in 16 cities.
Source: IRDA, Life Insurance Council 9

Agenda

Investment by Life Insurance Companies

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Investment by Life Insurance Companies


Rs. Crs

Parameter Central Government Securities State Government and other approved securities Investment in Infrastructure Sector

FY 00-01
47,512 5012

FY 07-08
2,96,687 85,198

FY 08-09
3,16,010 1,07,190

FY 09-10
3,61,520 1,36,998

24,887

91,283

1,15,369

1,39,710

In FY 2009-10 life insurers invested 7,44,505 lakh crores in Central government, state government and other approved securities.

Source: IRDA, Life Insurance Council

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Investment by Life Insurance Companies


Pattern of investment

..contd

Rs. Crs

Instruments Equity Fixed Income (Debt) Others

FY 2009-10

As on 30th Sep 2010

4,46,881 8,10,904 32,161

5,29,444 8,72,577 33,185

Total

12,89,946

14,35,206

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Source: Life Insurance Council (data is provisional)

Agenda

Expenses of Life Insurance Companies

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Expenses of Life Insurance Companies


 Insurance is a long term contract with average tenure of 15 years.  Comparatively high start-up cost to be related to a long tenure.  Under Section 40 B of Insurance Act 1938, there is a capping on expenses of management. - Exemption is granted to companies in first 5 years of operation. - Any non-compliance later is viewed adversely by IRDA.  Maximum Commission payable to agents under various product heads is prescribed in the Insurance Act (section 40 A).  Longer the term of the policy, lower is the premium and therefore percent commission is higher. For shorter term policies the percent commission is lower as premium is higher. This ensures that the absolute commission is reasonable.  In last four years (i.e. from FY 06-07 to FY 09-10) more than Rs.1,55,600 crores of premium was collected at a commission of less than 2.0%
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Agenda

Protection of Policyholders Interest

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Protection of Policy holders interest


 All advertisements are to be filed with the regulator & must satisfy fairness criteria. It is mandatory to explicitly give information on the definitions of all the applicable charges, method of appropriation of these charges and the quantum of all the charges during the entire term of the policy. All ULIP sales illustration should highlight the rate of return calculated at 6% and 10% to enable comparison across various products. The illustration is to be signed by the proposer. It is compulsory to mention on top each ULIP policy document In this policy, the investment risk in investment portfolio is borne by policy holder.  Policy document should clearly mention inter-alia the grievance redressal mechanism, name and address of grievance officer, ombudsman to whom complaint can be registered.

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Protection of Policy holders interest

..

.Contd

Under regulation 6(1)Policy holders are given a 15 day free-look period from the date of receipt of policy document, where in the policy holder can review the terms and condition of the policy and opt to return the policy and claim refund.  Section 45 of the Insurance Act 1938 - Policy not to be called in question on ground of mis-statement after two years . U/s 17d of Insurance Act 1938, there is a capping on expenses of management. Overall capping of expenses for ULIP is:More than 10 years - 225 bps Less than 10 years - 300 bps

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Protection of Policy holders interest


Recent Regulatory Changes

..

.Contd

Cap on surrender charges / discontinuance. Lock in period increased to 5 years Even spread of charges during the lock in period Guarantee of return at maturity for ULIP Pension / Annuity Plans (4.5%) Minimum life insurance cover should be 110% of Single Premium for age at entry of 45 years and above and 125 % for age at entry below 45 years. Disclosure of Commission to the prospect.

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Protection of Policy holders interest


Transparency and Corporate Governance

.Contd

Public Disclosures  Companies are required to disclose detailed financial & statistical information on quarterly /half yearly and yearly basis on their website.  Companies are required to publish audited half yearly and annual financial statement in newspapers. Corporate Governance  Companies are required to follow Corporate Governance guidelines which are followed by all listed companies in India.

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Protection of Policy holders interest


Grievance Redressal Mechanism

.Contd

Register a Complaint with the Toll free number / helpline of the Company

Complaint to the Grievance officer of the company

Complaint to Council /IRDA / Ombudsman

Note:There are 12 ombudsman Centre's in India. The companies cannot challenge the decision of the ombudsman
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Kerala Specific Data


Parameter FY 07-08 FY 07-08 FY 08-09 FY 09-10

Individual New Business Premium (In Cr) Individual New Business Policies

3,913 20,38,410

6,347 26,67,078

4,073 25,13,726

4,635 24,35,371

Branches

371

646

839

831

Number of Agents

1,10,127

1,40,099

1,59,408

1,59,884

Source: IRDA

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Thank You

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Life Insurance New Business Premium


Rs.Crs
Category

2004-05
Premium

2005-06 % 77 7 15 0.5
Premium

2006-07 % 74 4 22
Premium

2007-08 % 67 3 30
Premium

2008-09 % 60 3 37
Premium

2009-10 % 71 5 23
Premium

% 66 5 29 0.31

Life Annuity Pension Health Total

20,258 1,759 4,077 123 26,217

28,534 1,668 8,575 8 38,785

50,988 1,982 22,649 30 75,649

55,796 2,577 35,245 94 93,712

61,906 4,357 20,388 339 86,990

71,756 5,686 31,676 335 1,09,453

0.02

0.04

0.1

0.39

Note: Figures may not add up to 100% due to rounding off

Source: IRDA

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Life Insurance Business


New Business Premium collected for Pension and Annuity schemes in last 5 years
Category

Rs.Crs

2005-06 10,243

2006-07 24,631

2007-08 37,822

2008-09 24,745

2009-10 37,362

Pension & Annuity

Policies
Category

2005-06

2006-07

2007-08

2008-09

2009-10

Pension Policies

20,42,661

67,59,813

99,23,334

51,56,146

64,66,139

Source: IRDA

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