Development in Life Insurance

iConnect

22 August, 2015

Sunil Sharma

Agenda

India snap shot

Life insurance ; growth story

Pattern of savings in India

Insurance Penetration

Issues and Challenges in Life Insurance

Opportunities for actuaries

Environment

India’s Demographics Population 128.28 crore.

GDP is $ 2.0 trillion (approx.Rs. 125 lakh crore)

72 % of the total population resides in semi -urban and

rural areas.

Economy expected to grow at 7.5% between 2015-16.

Services industry contribute to 65% to GDP

Insurance penetration 3.3%in FY14 ( 3.9% FY13) against

world average of 6.2%.

Pattern of Savings in India

Type of Savings FY 11-12 FY 12-13

FY 13-14

Bank and other

deposits 59.1 56.6 58.8

Insurance 21.2 17.3 17.0

Provident and

Pension fund 10.3 11.7 11.6

Shares and

debentures -0.3 4.1 2.9

Currency and

others 9.7 10.3 9.7

Source: IRDA, Public disclosures, Life insurance council, Company

estimates

Snapshot of Life Insurance Industry

Source: IRDA, Life Insurance Council (FY 14-15 data is provisional)

Parameter FY 99-

00 FY 11-

12 FY 12-13

FY 13-14

FY 14-15

(provisional

)

India’s share of world

premium (Life)

0.50% 2.30 % 2.03% 2.20 % 2.1 %

New Business Policies

Indiviual (In Cr)

1.69 4.41 4.41 4.08 2.59

In force Policies (In Cr) 10.14 33.52 33.61 33.54 32.75

5

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

~ 200 countries in the world have population below nos of policies in India

Insurance Penetration Trend

1.93

2.32

2.71

3.26

2.88

3.17 3.14

4.8 4.7

4.6

5.2 5.1

4.1 3.96 3.9

3.3

0

1

2

3

4

5

6

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Penetration

Penetration of Life Insurance

0

2

4

6

8

10

USA UK Germany Japan India Russia Brazil China% o

f P

rem

ium

to G

DP

Life Insurance Penetration

Source: Life insurance council

Total premium (INR Bn)

Penetration (as a % to GDP)

New business premium1 (INR Bn)

Number of players

FY2014

24

454

3,141

FY2002

12

116

501

2.1%

28.7%

26.1%

Source: IRDA, Public disclosures, Life insurance council,

India life insurance growth story

Assets under management (INR Bn)

20,069 2,304 24.3%

1. Retail weighted premium

FY2008

18

527

2,014

8,477

-2.4%

7.7%

15.4%

4.0% 2.8%

8

Future is bright

Parameters Actual as of Projection

2015

2015-16 2020-21 2023-24 2024-

25

GDP (Trillion USD) 2.0 2.10 2.81 2.65 3.55

Premium (Billion USD) 57

( 3.27 lakh

crore)

--- --- --- ---

Gross Premium

underwritten as % of

GDP( Penetration) (Billion

USD) :-

(a) 3% --- 63 85 101 107

(b) 4% --- 84 113 134 142

(c) 5.5% --- 126 169 202 214

1USD = INR 58

Projection of Life insurance Premium considering GDP growth rate of 6 %

9 Source: Life insurance council, Company estimates

Issues and Challenges in Life Insurance

Productivity of distribution Channels

Tied Agents

Brokers

Banks

Others

Direct

Expense Management

Acquisition Expenses; expense overrun

Maintenance Expenses

Regulations

Solvency

Taxation

Issues and Challenges in Life Insurance

Misselling

Low persistency

Surrenders

Asset Liability Management

Availability of Assets

Difficulty in matching the cash flows

Guaranteed non-par Products

Comparison with UK and US Profession

Institut

e

Incorp. Nos of

Fellows

Nos of

Associa

tes

Date of

report

IAI Sept1944 278 151 31.03.14

SOA 1949 15,729 9,849 31.12.14

IFA July 1948 11,340 418 31.12.13

Where actuaries are employed in UK

Life Insurance (insurance and reinsurance cos.)

Pensions and Employee benefits ( trusts, consulting companies)

General Insurance ( insurers and reinsurers)

Investment Management ( commercial Banks)

Health and care insurance or advice ( insurer, reinsurers and consulting

Firms)

Investment Banking ( advisory and Finance)

Enterprise Risk Management ( insurers, regulators, consultants, Banks

and non-Ins companies)

Education ( Universities and colleges)

And Information technology

13th Month persistency of Industry

85%

71%

65%

72% 72%

70%

67%

60%

65%

70%

75%

80%

85%

90%

Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14

Series1 85% 71% 65% 72% 72% 70% 67%

13th month persistency for LI industry

Source: IRDA data on industry 13th month persistency

Expense of management

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

110.0%

Expense of Management to Gross Direct Premium Ratio

Source: IRDA data public doisclosures; IFS Seminar

Thank You