Insurance Sector Report November 2017

For updated information, please visit www.ibef.org November 2017
INSURANCE

Table of Content
Executive Summary……………….….…….3
Advantage India…………………..….……...4
Market Overview and Trends……….….…..6
Porters Five Forces Analysis.….…..……....22
Strategies Adopted……………...…………..24
Growth Drivers……………………................26
Case Studies……………....……..………..…39
Opportunities…….……….......………………31
Useful Information……….......…………...….45

For updated information, please visit www.ibef.orgInsurance3
EXECUTIVE SUMMARY
 The domestic life insurance industry registered 26.13 per cent growth for new business premium in financial
year 2015-16, generating a revenue of US$ 20.34 billion largely due to the high growth in the group single
premium policy. During January to September 2017 period, the life insurance industry recorded a new
premium income of Rs 0.92 trillion (US$ 14.28 billion), indicating a growth rate of 21.14 per cent.
 The non-life insurance premium market grew at a CAGR of 12.1 per cent over FY04-161, from US$ 3.4
billion in FY04 to US$ 13.35 billion in FY161.
Rapidly growing
insurance segments
 The market share of private sector companies in the non-life insurance market rose from 13.12 per cent in
FY03 to 43.64 per cent in FY181.
Increasing private
sector contribution
 Crop insurance market in India is the largest* in the world and covers around 32 million farmers; which
accounted for nearly 19 per cent of the total farmers in the country.
 Strong growth in the automotive industry over the next decade to be a key driver of motor insurance.
Crop, health and motor
insurance to drive
growth
Notes: CAGR - Compound Annual Growth Rate, 1: Upto September 2017,* As of 2015 Figures are as per latest data available
Source: Swiss-Re, IRDA Annual Report, Mckinsey estimates

ADVANTAGE INDIA
 Growing interest in insurance among
people; innovative products and
distribution channels aiding growth
 Increasing demand for insurance
offshoring
 Growing use of internet has started
increasing demand
 Life insurance in low-income urban
areas
 Health insurance, pension segment
 Strong growth potential for micro
insurance, especially from rural areas
 Insurance companies in India have
raised over Rs 35,000 crore (US$ 5.43
billion) through public issues in 2017*.
 Increase in FDI limit to 49 per cent
from 26 per cent, as proposed in 2012,
will further fuel investments
 Tax incentives on insurance products
 Passing of Insurance Bill gives IRDA
flexibility to frame regulations
 Clarity on rules for insurance IPOs
would infuse liquidity in the industry
 Repeated attempts to make the sector
more lucrative for foreign participants
ADVANTAGE
INDIA
Notes: 2020E - Expected value for 2020; Estimate according to BCG, IRDA - Insurance Regulatory and Development Authority, * - up to October 2017
Source: IRDA

Insurance
MARKET OVERVIEW
AND TRENDS

EVOLUTION OF THE INDIAN INSURANCE SECTOR
Source: IRDA
Notes(1): As of September 2012, LIC - Life Insurance Corporation of India, GIC - General Insurance Corporation of India, IRDA - Insurance Regulatory and Development Authority
 All life insurance companies were
nationalised to form LIC in 1956 to
increase penetration and protect policy
holders from mismanagement
 The non-life insurance business was
nationalised to form GIC in 1972
 Post liberalisation, the insurance industry recorded significant growth;
the number of private players increased to 44 in 2012(1)
 The industry has been spurred by product innovation, vibrant distribution
channels, coupled with targeted publicity and promotional campaigns by
the insurers
 In December 2014, Government approved the ordinance increasing FDI
limit in Insurance sector from 26 per cent to 49 per cent. This would
likely to attract investment of US$ 7-8 billion
 As per Union Budget 2016-17, new health
insurance scheme under the National Health
Protection Scheme has been introduced
 In Union Budget 2017, government
increased the coverage from 30 per cent to
40 per cent under Pradhan Mantri Fasal
Bima Yojna.
 Insurance companies raised more than US$
5 billion from public issues.
 Malhotra Committee recommended opening
up the insurance sector to private players
 IRDA, LIC and GIC Acts were passed in
1999, making IRDA the statutory regulatory
body for insurance and ending the monopoly
of LIC and GIC
 In 2015, Government introduced Pradhan
Mantri Suraksha Bima Yojna and Pradhan
Mantri Jeevan Jyoti Bima Yojana
 Government introduced Atal Pension Yojana
and Health insurance in 2015
1956-72 1993-99 20152000-14
2016-17
onwards

IRDA GOVERNS THE INDIAN INSURANCE SECTOR
Source: IRDA, Aranca Research
Ministry of Finance
Government of India)
Insurance Regulatory and
Development Authority (IRDA)
Private (23) Private (27)
Life insurance (24 players)
Non-life insurance
(33 players)
Re-insurance (1 player)
Public (1) Public (6) Public (1)
 Insurance Regulatory and Development Authority (IRDA)
• Established in 1999 under the IRDA Act
• Responsible for regulating, promoting and ensuring orderly growth of the insurance and re-insurance business in India

INDIA’S INSURANCE MARKET CONTINUES TO BE
STRONG
Source: Reserve Bank of India (RBI), Aranca Research;
Note: CAGR - Compounded Annual Growth Rate, FY17 1 - Till December 29, 2016
 The insurance industry is expected to reach US$ 280 billion by 2020. In 2016, around 46 private players were operating in the industry, while Life
Insurance Corporation accounted for 72.61 per cent of the country’s insurance market.
 Individual single premiums received increased from US$ 0.16 billion in 2015 to around US$ 1.02 billion in 2016.
 Indian Government announced its plans to divest US$ 1.63 billion worth of stakes in PSU general insurance companies to execute the steep
disinvestment target of US$ 10.78 billion in FY17.
 IRDAI has allowed insurers to invest up to 10 per cent in additional tier 1 (AT1) bonds, that are issued by banks to augment their tier 1 capital, in
order to expand the pool of eligible investors for the banks.

PREMIUMS GROWING AT A BRISK PACE
19
24
34
50
48
56
64
60
52
52
61.78
54.58
4
5
6
7
7
8
10
11
12
13
13.9
14.3
0
10
20
30
40
50
60
70
80
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
Life Non life
Source: Insurance Regulatory and Development Authority, Aranca Research, General Insurance Council
Note: CAGR - Compound Annual Growth Rate, Figures are as per latest available data
Visakhapatnam port traffic (million tonnes)Gross premiums written in India (US$ billion)
CAGR 10.49%
 The total insurance market expanded from US$ 23 billion in FY05
to US$ 68.88 billion in FY16.
 Over FY05–FY16, total gross written premiums increased at a
CAGR of 10.49 per cent .
 Life insurance companies in India earned US$ 25.12 billion as first
year premiums in FY17.
 Gross premium underwritten by general insurers in India reached
US$ 13.3 billion in FY18 (up to September 2017).
 Gross premium written in India for non life insurance sector for
FY16 is US$ 14.33 billion and in FY16, the gross premium written
in India for life insurance sector stood at US$ 54.58 billion.
 In November 2016, the total growth in life insurance premium was
around US$ 2.38 billion as compared to US$ 1.12 billion in
November 2015, witnessing a growth of 113 per cent. Similarly
during the same period, the individual single premium grew by
US$ 995 million as compared to US$ 164.06 million in 2015,
recorded a growth of more than 500 per cent.

LIFE INSURANCE MARKET APPEARS VIBRANT
1
2
3
6
13
14
17
19
18
14
13
15
15
10
11
14
17
21
28
37
34
39
45
42
38
39
39.3
39.6
0
10
20
30
40
50
60
70
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
Private Public
Source: Swiss Re, BCG, Insurance Regulatory and Development Authority, Aranca Research; , ICRA, Financial Express
Note: CAGR - Compounded Annual Growth Rate, Figures are as per latest data available
Visakhapatnam port traffic (million tonnes)Growth in life insurance premiums (US$ billion) In August 2017 the Life Insurance industry reported a 19 per cent
growth in overall annualised premium equivalent with the help of
both private players and Life Insurance Corporation .
 The life insurance market grew from US$ 10.5 billion in FY02 to
US$ 54.58 billion in FY16.
 Over FY02–FY16, life insurance premiums expanded at a CAGR
of 12.49 per cent.
 The life insurance industry has the potential to grow 2-2.5 times by
2020 in spite of multiple challenges supported by long-term trends
and fundamentals underlying household savings.
 Private life insurers in India posted 28 per cent year-on-year
increase in its annual premium equivalent (APE) for June 2017.
 Life insurance industry in India is expected to grow at 15-18 per
cent on APE basis in FY18.
CAGR 12.49%

INCREASING PENETRATION AND DENSITY OF LIFE
INSURANCE OVER THE YEARS
Source: Insurance Regulatory and Development Authority (IRDA), Aranca Research, BCG – The Changing Face of Indian Insurance
Note: Life insurance density* is defined as the ratio of premium underwritten to the total population in a given year, CAGR - Compound Annual Growth Rate , Figures as per latest available
data
3.17
3.4
4.8
4.7
4.6
5.2
5.1
4.1
3.96
3.9
3.3
3.4
4.00
1
2
3
4
5
6
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17E
Insurance penetration (%) Insurance density (US$ )
38.4
46.6
47.4
54.3
64.4
59
53.2
52
55
54.7
54.99
0
10
20
30
40
50
60
70
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016E
 Insurance density in India increased from US$ 38.4 in 2006 to US$ US$ 54.99 in 2016 (estimated).
 Insurance penetration reached 3.4 per cent in FY16 and is expected to cross 4 per cent in FY17.

INCREASING PRIVATE SECTOR ACTIVITY IN LIFE
INSURANCE SEGMENT
Note: Figures are as per latest data available, E- estimated, based on first year premium collection
 Over the years, share of private sector in life insurance segment has grown from around 2 per cent in FY03 to 29.6 per cent in FY16. The share of
private life insurers is estimated at 28.93 per cent in FY17.
98.00%
2.00%
Public sector
Private sector
Share of public and private sector in life insurance segment (%)
FY03
Share of public and private sector in life insurance segment (%)
FY17E
71.06%
28.93%
Public sector
Private sector

LIC CONTINUES TO DOMINATE LIFE INSURANCE
SEGMENT
Source: LIC, Aranca Research, IRDA
Visakhapatnam port traffic (million tonnes)
Market share of major companies in terms of first year life
insurance premium collected (FY17)
 As of March 2017, life insurance sector had 23 private players in
comparison to only 4 in FY02.
 With 71.07 per cent share market share in FY17, LIC continues to
be the market leader, followed by ICICI Prudential.
71.07%
4.49%
4.97%
5.80%
13.67%
LIC
ICICI
HDFC
SBI Life
Others

SHIFT TOWARDS NON-LINKED INSURANCE PLANS
41% 42%
37%
24%
17% 15%
12% 13%
59% 58%
63%
76%
83% 85% 88% 87%
0%
20%
40%
60%
80%
100%
120%
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16
Linked Premium Non linked Premium
Source: IRDA Annual Report, KPMG Analysis
Notes: *Growth rate in INR terms, Linked Plans - In linked plans, a part of the investment goes towards providing you life cover while the residual portion is invested in a fund which in turn
invests in stocks or bonds; the value of investments alters with the performance of the underlying fund, Figures are as per latest available data
In Non-Linked plans, a major chunk of investible funds are in debt instruments, giving steady and almost assured returns over the long term
Visakhapatnam port traffic (million tonnes)Share of linked and non-linked insurance premium The industry is witnessing a shift towards the traditional non-linked
insurance plans
 The share of non-linked insurance increased from 59.1 per cent in
FY09 to 87 per cent in FY16

STRONG GROWTH IN NON-LIFE INSURANCE MARKET
Note: CAGR - Compound Annual Growth Rate FY16: Till November 2015
 The non-life insurance market grew from US$ 2.6 billion in FY02 to US$ 8.8 billion in FY17.
 Over FY06–16, non-life insurance premiums increased at a CAGR of 11.05 per cent.
 The number of policies issued increased from 65.55 million in FY08 to 161.17 million in FY17, at a CAGR of 10.5 per cent.
65.55
67.06
88.49
91.65
100.29
109.5
116.68
126.06
126.48
161.17
0
20
40
60
80
100
120
140
160
180
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
0.8
1.2
1.9
2.7
2.7
2.9
3.8
4.7
5.1
5.7
6.3
5.9
9.25
3.3
3.6
3.8
4.4
4.2
4.6
5.8
6.7
6.8
7.2
7.7
7.09
10.55
0
5
10
15
20
25
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
Private Public
CAGR 11.05%
Growth in non-life insurance premium (US$ billion) Number of non-life insurance policies (million)
CAGR 10.5%

PENETRATION AND DENSITY LOWER, INDICATING
ROOM FOR GROWTH
Source: IRDA Annual Report, Swiss Re, Aranca Research
Note: CAGR - Compound Annual Growth Rate; IRDA Chairman, Mr. T S Vijayan
Non-life insurance penetration at current prices (per cent)
Non-life insurance density (INR) (Gross Direct Premium/
Population(
 The non-life insurance market grew from US$ 2.6 billion in FY02 to US$ 19.8 billion in FY17.
 Non life insurance density increased from USD4.0 in FY04 to USD11.5 in FY16 at a CAGR of 11.13 per cent.
 As per IRDA, in order to increase the market penetration in health insurance people are needed to be educated about the benefits of health
insurance along with providing incentives and free check-ups.
0.61 0.60 0.61 0.62
0.66
0.72
0.69 0.68 0.70
0.84
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
263.0
286.0
329.0
398.0
498.0
572.0
614.0
657.0
724.0
0
100
200
300
400
500
600
700
800
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
CAGR 15.44%

SHARES IN NON-LIFE INSURANCE MARKET: MOTOR
INSURANCE LEADS
Source: IRDA Annual Report, Aranca Research
Visakhapatnam port traffic (million tonnes)Break-up of non-life insurance market in India (FY18*) In FY18*, motor insurance accounted for 38.1 per cent of non-life
insurance premiums earned in India.
 With Gross Direct Premiums at Rs 17,340.50 crore (US$
2.7billion) in FY18*, the health segment has a 23.9 per cent share
in gross direct premiums earned in the country.
 Private players accounted for a share of around 48.18 per cent in
the Gross Direct Premiums generated in non-life insurance sector
while public sector companies and specialised garnering around
51.82 per cent share in September 2017
 Major private players are ICICI Lombard, Bajaj Allianz, IFFCO
Tokio, HDFC Ergo, Tata-AIG, Reliance, Cholamandalam, Royal
Sundaram and other regional insurers
38.10%
23.90%
7.60%
4.20%
26.2%
Motor
Health
Fire
Marine
Others
Source: *till September 2017

HIGHER PRIVATE SECTOR PARTICIPATION IN NON-
LIFE SEGMENT
Note: CAGR - Compound Annual Growth Rate, * up to September 2017
 The market share of private sector companies in non-life insurance segment rose from 15 per cent in FY04 to 45.4 per cent in FY16
 The Gross Direct Premium of private companies increased from US$ 0.8 billion in FY05 to US$ 6.1 billion in FY16, witnessing growth at a CAGR
of 20.28 per cent during FY02-16. In FY17 it reached Rs 59,601.56 crore (US$ 8.88 billion)
0.8 1.2
1.9
2.7 2.7 2.9
3.8
4.7
5.1
5.7
6.3 6.1
8.9
0
1
2
3
4
5
6
7
8
9
10
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
Growing share of private sector Non-life insurance premium of private sector (US$ billion)
48.18%
48.18%
FY18*
48.18%
53.12%
FY04
Public sector Private sector

KEY PLAYERS IN THE NON-LIFE INSURANCE
SEGMENT
Source: IRDA Business Report, Aranca Research
Visakhapatnam port traffic (million tonnes)
Market share of major companies in terms of Gross Direct
Premium collected (FY18*)
 The number of companies increased from 15 in FY04 to 24 in
FY17; six of these companies are in the public sector.
 The public sector companies accounted for a cumulative share of
about 45.88 per cent of the total Gross Direct Premium in the non-
life insurance segment in Q1 FY18.
 New India leads the market with 15.18 per cent share.
 Private players are not far behind and compete better in the non-
life insurance segment. 15.18%
11.75%
11.28%
7.68%
9.58%
6.21%
4.93%
33.39%
New India
United India
National
Oriental
ICICI-Lombard Oriental
Bajaj Allianz
HDFC ergo
Others
Total size:
US$ 8.45
billion
Note: * up to August 2017

NOTABLE TRENDS IN THE INSURANCE SECTOR
 New distribution channels like bancassurance, online distribution and NBFCs have widened the reach and reduced costs
 Firms have tied up with local NGOs to target lucrative rural markets
 In April 2017, IRDAI started a web portal – isnp.irda.gov.in – that will allow the insurers to sell and register policies online.
This portal is open to intermediaries in insurance business as well.
 India Post Payments Bank (IPPB) plans to start selling insurance products and mutual funds of other companies by early
2018, and is to be open only to "non- exclusive" tie-ups. Nearly 100 firms, domestic as well as foreign, have showed keen
interest in partnering with the bank
Emergence of new
distribution channels
Notes: NBFC - Non Banking Financial Company, NGO - Non-Governmental Organisation, EV - Embedded Value
 In the life insurance segment, share of private sector in the total premium increased to 29.6 per cent in FY16 from 2.0 per
cent in FY03
 In the non-life insurance segment, share of private sector increased to 41.2 per cent in FY16 from 14.5 per cent in FY04
Growing market share
of private players
 The life insurance sector has witnessed the launch of innovative products such as Unit Linked Insurance Plans (ULIPs)
 Other traditional products have also been customised to meet specific needs of Indian consumers
Launch of innovative
products
 Large insurers continue to expand, focusing on cost rationalisation and aligning business models to realise reported
Embedded Value (EV), and generate value from future business rather than focus on present profits
Mounting focus on EV
over profitability

Insurance
PORTERS FIVE
FORCE ANALYSIS

Porter’s Five Forces Framework Analysis
 Supplier being the distributor or
agent have high bargaining power
because they have customer
database and can influence
customers in making choices
Bargaining Power of Suppliers
 Similarity in services makes
switchover a potent threat
 Investment oriented customers have
switched to other avenues
Threat of Substitutes
 Insurance industry is becoming
highly competitive with 52 players
operating in the industry
 Companies are competing on price
and also using low price and high
returns strategy for customers to lure
them
Competitive Rivalry
 Other financial companies can enter
the industry
 Overall threat is medium given that
entry is subject to license and
regulations
Threat of New Entrants
 Bargaining power of customers
especially corporate is very high
because they pay huge amount of
premium
Bargaining Power of Buyers
Positive Impact
Neutral Impact
Negative Impact
Source: Aranca Research

STRATEGIES ADOPTED
 Players in industry are investing in Information Technology to automate various processes and cut costs without
affecting service delivery. It is estimated that digitisation will reduce 15-20 per cent of total cost for life insurance
and 20-30 per cent for non-life insurance
 From October 2016, IRDAI has mandated having an E-insurance (electronic insurance) account to purchase
insurance policies
Emergence of new
distribution
channels
 Companies are trying to differentiate themselves by providing wide range of products with unique features. For
example, New India Assurance launched Farmers’ Package Insurance to covering farmer’s house, assets, cattle
etc. United India launched Workmen Medicare Policy to cover hospitalisation expenses arising out of accidents
during and in the course of employment
 In March 2017, HDFC Life in collaboration with Haptik, has announced the launch of the country’s 1st life insurance
chatbot which will help the customer as a financial guide to aid them to choose the most suitable plans befitting their
needs.
Growing market
share of private
players
 Focus on providing one kind of service help insurance companies in differentiation. For example, SBI is
concentrating on individual regular premium products as against single premium and group products
Focus
 The Insurance Law (Amendment) Bill, was passed in 2015 raises the foreign investment cap in the sector from 26
per cent to 49 per cent
Insurance
(Amendment) Law
2015

DEMAND GROWTH FOR INSURANCE PRODUCTS SET
TO ACCELERATE … (1/2)
Source: ICICI, RBI Annual Report, Aranca Research
Notes: Financial savings denote investment in equity and debt instruments, E – Estimates, Figures are as per latest available data
Household savings India’s robust economy is expected to sustain the growth in insurance
premiums written
 Higher personal disposable incomes would result in higher household
savings that will be channelled into different financial savings
instruments like insurance and pension policies
 Household savings reached US$ 388.20 billion in 2016 from US$ 89
billion in 2000
89.0
306.0
373.7
339.3
378.2
388.2
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
400.0
450.0
2000 2010 2013 2014 2015 2016

1.5% 2.0% 5.0%
3.0%
6.0%
11.0%8.0%
15.0%
20.0%
42.0%
45.0%
46.0%
44.0% 31.0% 18.0%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
2005 2016 2025F
Elite(>30800) Affluent(15400-30800)
Aspirers(7700-15400) Next billion(2300-7700)
Strugglers(<2300)
209.10 266.5
304.8
304.8
DEMAND GROWTH FOR INSURANCE PRODUCTS SET
TO ACCELERATE … (2/2)
Visakhapatnam port traffic (million tonnes)Million household, 100% Per capita income and rural income are increasing
 The number of middle class households (earning between US$
2,300 and US$ 30,800 per annum) is estimated to increase more
than fourfold to 234 million by 2025 from 113 million in 2005
 Rising per capita income leads to increased spending on medical
and healthcare services
 Lifestyle diseases are set to account for a greater part of the
healthcare market
 Lifestyle diseases such as cardiac diseases, cancer and diabetes
are treated with the help of biotechnology products, thereby
boosting revenues of biotech companies
 The growing GNI per capita, PPP of US$ 6,020 in FY15 resulted
in improved lifestyle due to increased purchasing power of
customers for healthcare
Source: Fortis Healthcare Limited 2008–09, McKinsey Quarterly, NCAER, Aranca Research
Notes: Income distribution is calculated in constant 2015 dollars; $1=65. Because of rounding, not all percentages add up to 100. F - Forecast

FAVOURABLE POLICY MEASURES AID THE SECTOR
 IRDA recently allowed life insurance companies that have completed 10 years of operations to raise capital through
Initial Public Offerings (IPOs). Companies will be able to raise capital if they have embedded value of twice the paid
up equity capital
 SBI Life has already raised funds through its IPO.
Life insurance
companies allowed
to go public
 The government has also extended Rashtriya Swasthya Bima Yojana (RSBY) to cover unorganised sector workers
in hazardous mining and associated industries
 In Union Budget 2017-18, the government introduced an insurance pension scheme that gives an assured return of
8 per cent for senior citizens through LIC to concentrate on social security.
Union Budget
2017-18
 Insurance products are covered under the exempt, exempt, exempt (EEE) method of taxation. This translates to an
effective tax benefit of approximately 30 per cent on select investments (including life insurance premiums) every
financial year
 In 2015, Tax deduction under Health Insurance Scheme has been increased to US$409.43 from US$245.66 and for
senor citizens tax deduction has been increased to US$491.32
Tax incentives
 Revival package by government will help companies get faster product clearances, tax incentives and ease in
investment norms. FDI limit for insurance company has been raised from 26 per cent to 49 per cent, providing
safeguard and ownership control to Indian owners
Approval of
increase in FDI limit
and revival package
Notes: RSBY - Rashtriya Swasthya Bima Yojana, FDI - Foreign Direct Investment

RISING PRIVATE SECTOR INVESTMENT IN
INSURANCE
Investments from the private sector are increasing, as they see a
huge opportunity in the growing insurance sector of the country
Religare Health Insurance  US$ 110.4 million by 2016
AEGON Religare Life
 US$ 71 million in 2010; plans to invest
 US$ 445 million through 2016
HDFC Life
 Planning to raise US$ 3.9 billion with 10
per cent stake sale. Through IPO which
is expected in September 2015
 HDFC Life has enter the micro-
insurance segment by launching two
schemes named Jeevan Suraksha and
Credit Suraksha
Source: Towers Watson; Assorted news articles, Aranca Research
 Most of the existing players are tying up with banks to expand
their distribution network
 Few players like HDFC Life are planning to go public; others are
selling stakes to generate funds
 In 2015, Insurance Bill was passed that will raise the stake of
foreign investors in the insurance sector to 49 per cent, fuelling
the participation of private sector investment in the insurance
sector in the country
 In February 2017, Bank of Maharashtra partnered with insurance
company Cigna TTK Health, to market their insurance products in
the bank’s branches, across the country.
 Dena Bank and Apollo Munich Health Insurance announced a
corporate agency tie up in March 2017. As per the tie-up, Dena
Bank would be distributing Apollo’s health insurance products.

INDIA’S INSURANCE MARKET OFFERS A HOST OF
OPPORTUNITIES ACROSS BUSINESS LINES
Opportunities for
Indian
insurance market
Low-income urban and
pension markets
Crop insurance
Motor insurance
markets
Micro-insurance
Health insurance
markets

NON-LIFE INSURERS: MOTOR INSURANCE MARKETS
Source: IRDA, ACMA, SIAM, Aranca Research
Note: E in the axis for the figures above refer to estimates, GDP - Gross Domestic Product, CAGR - Compound Annual Growth Rate, ACMA - Automotive Component Manufacturers
Association of India(1)– Data upto June 2016, *up tp September 2017
 Strong growth in the automotive industry over the next decade will be a key driver of motor insurance
 Proposed IRDA draft envisages a 10–80 per cent rise in premium rates for the erstwhile loss-making 3rd party motor insurance
 In 2016, number of commercial vehicles and passenger vehicles sold in the country were recorded at 0.8 million and 3.4 million respectively, while
the number of two and three wheelers sold were 19.76 million
 In FY18*, Motor and Health sector constituted 62 per cent of the non-life insurance market
Breakup of non-life insurance market in India FY18* Vehicle production in India (million units)
38.10%
23.90%
7.60%
4.20%
26.2%
Motor
Health
Fire
Marine
Others
3.4
0.8
19.76
10
2.4
30.2
0
5
10
15
20
25
30
35
Car Commercial
Vehicles
2&3 wheelers
2016 2021E

NON-LIFE INSURERS: HEALTH INSURANCE MARKETS
 Only 1.5–2 per cent of total healthcare expenditure in India is currently covered by insurance providers.
 Only 18 per cent of people in urban areas and 14.1 per cent in rural areas are covered under any kind of health insurance scheme
 Total health insurance premiums increased from US$ 733.1 million in FY07 to US$ 4,084.03 million in FY16, witnessing growth at a CAGR of
21.03 per cent. Gross premium underwritten for health insurance was US$ 2.7 billion in FY18*.
 In FY17 gross direct premium income underwritten under health insurance was US$ 4.78 billion.
 Absence of a government-funded health insurance makes the market attractive for private players
 Introduction of health insurance portability expected to boost the orderly growth of the health insurance sector
 In July 2016, IRDA issued Health Insurance Regulations, 2016. These regulations replace the Health Insurance Regulations, 2013. As per these
new norms, companies will provide better data disclosure, pilot products, coverage in younger years, etc.
 Private insurance coverage is estimated to grow by nearly 15per cent annually till 2020
 Government-sponsored programmes expected to provide coverage to nearly 380 million people by 2020, driven by initiatives such as RSBY and
ESIC
 RSBY is a centrally sponsored scheme to provide health insurance to Below Poverty Line (BPL) families and eleven other defined categories of
unorganised workers, namely building and other construction workers, licensed railway porters, street vendors, MGNREGA workers, etc.
Note: RSBY - Rashtriya Swasthya Bima Yojana, ESIC – Employees’ State Insurance Corporation, MREGA – Mahatma Gandhi National Rural Employment Guarantee Act., NSSO, up to
September 2017

STRONG POTENTIAL IN CROP INSURANCE
Source: Agricultural Insurance Company of India Annual Report, Department of Agriculture and Cooperation, IRDA, Aranca Research, Livemint, PTI
 Awareness about crop insurance in India is 38.8 per cent and still crop insurance market in India is the largest in the world, covering around 30
million farmers. Over 9 million farmers benefited from ‘Pradhan Mantri Fasal Bima Yojana’ in 2016-17. Government of India released Rs 28386.91
crore (US$ 4.23 billion) in 2016-17 under various crop insurance schemes.
 To provide crop insurance to farmers, Government has launched various schemes like National Agriculture Insurance Scheme (NAIS), Modified
National Agriculture Insurance Scheme (MNAIS) and Weather-based Crop Insurance Scheme (WBCIS)
 Total sum insured under crop insurance is US$ 919.41 million in FY16
 Government of India plans to increase the coverage to 50 million during the 12th Five-Year Plan
 As of February 2017, the Central Government aims at enhancing crop insurance cover from 22 per cent of farmers to 50 per cent in the
forthcoming 2 years.
Number of farmers covered under insurance scheme (million) Sum Insured (US$ million)
10.1
6.9
7.3
10.4
6.7
10.5
0
2
4
6
8
10
12
FY11 FY12 FY13 FY14 FY15 FY16
877.1
516.0 487.1
1062.4
836.6
919.41
0
200
400
600
800
1000
1200
FY11 FY12 FY13 FY14 FY15 FY16
Note: Figures are as per latest available data

SBI LIFE
Source: SBI Life Annual Report, IRDA, Company website, Aranca Research
Notes: CAGR - Compound Annual Growth Rate
 SBI Life Insurance is a joint venture between Indian banking giant State Bank of India (74 per cent) and France headquartered BNP Paribas
Assurance (26 per cent). The company’s IPO was in September 2017
 The company primarily deals in life insurance and pension plans with 758 offices across India. In FY16, it issued around 1.274 million insurance
policies.
 Between FY08 and FY17, SBI Life’s profits increased at a CAGR of 36.91 per cent with its annual profits increasing to US$ 141.99 million by
FY17. In FY16, it accounted for a market share of 17.2 per cent among all life insurance companies.
 The company earned US$ 837.5 million as net premium in Q2FY18.
Total premium collected (US$ billion) Net profit (US$ million)
1.4
1.6
2.1
2.8 2.8
1.9 1.8
2.1
2.4
3.1
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
CAGR 9.23%
8.4
39.0
58.2
80.2
118.6
114.5
122.8
136.0
131.5
142.0
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
CAGR 36.91%

TATA-AIA LIFE … (1/2)
 Tata AIA Life Insurance Company Limited (Tata AIA Life) is a joint venture between Tata Sons (74 per cent) and AIA Group Limited (26 per cent).
 Overall life insurance premium increased from US$ 198.8 million in FY06 to US$ 497 million in FY 17, witnessing growth at a CAGR of 8.68 per
cent over FY06-17.
 The sum assured increased from US$ 4 billion in FY06 to US$ 10 billion in FY16, rising at a CAGR of 9.60 per cent. The company earned US$
96.98 million as premium in Q1 FY18.
4.00
9.00
9.00
10.00
11.00
13.00
13.00
10.00
9.20
12.00
10.00
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
199
303
508
595
737
874
774
508
385
351
389
497
0
100
200
300
400
500
600
700
800
900
1000
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
Total life insurance premium (US$ million) Total sum assured (US$ billion)
CAGR 8.68% CAGR 9.60%
Source: Company website, IRDA, Aranca Research
Notes: CAGR - Compound Annual Growth Rate, (1): As on September 30, 2016

TATA-AIG LIFE …(2/2)
Objective for establishing micro insurance
 Fulfilment of corporate social responsibility
 Increase brand recognition to boost market entry –today’s micro
clients maybe tomorrow’s high-premium clients
 To target untapped markets and income groups of rural India
Key strategic decisions
 The micro insurance business model must be separated from
business model
 Selling micro insurance would require new, alternative distribution
mechanisms
The micro insurance business model
 A special microinsurance
team called the Rural and
Social Team is formed
 Identify and partner with
credible NGOs operating in
the local community
 NGO suggests good
agents for microinsurance
policies (micro-agents)
 A group of micro-agents
called a Community Rural
Insurance Group (CRIG) is
formed; it relies on direct
marketing of
microinsurance policies to
local community members
 Local operations like
collecting and aggregating
the premiums, training
micro-agents, and helping
to distribute benefits
looked after by the NGO;
this saves administrative
costs for Tata-AIG
New business unit Partnering with NGOs Forming CRIGs
Local operations
managed by NGOs
Source: Company website, Aranca Research

NEW INDIA ASSURANCE
 New India Assurance, a wholly owned subsidiary of Government of
India, is the largest non-life insurance company in India with a
market share of 16 per cent in FY17 in the non-life insurance
segment
 It is the largest non-life insurer in Afro-Asia, excluding Japan
 New India Assurance has been selected as the Best General
Insurance Company by IBN Lokmat Channel in association with
Maharashtra Chamber of Commerce, Industry and Agriculture
(MACCIA)
 The company has overseas presence in 22 countries: Japan, UK,
Middle East, Fiji and Australia
 It has been rated as "A-" (Excellent) for six consecutive years,
indicating its excellent risk-adjusted capitalisation, prospective
improvement in underwriting performance and leading business
profile in the direct insurance market in India
 Gross Direct Premium in the country increased from US$ 1.19 billion
in FY09 to US$ 2.3 billion in FY16, growing at a CAGR of 9.92 per
cent over FY09-16. The figure reached US$ 2.97 billion in FY17.
 The company raised Rs 9,600 crore (US$ 1.49 billion) through its
IPO in November 2017.
Visakhapatnam port traffic (million tonnes)Gross Direct Premium (US$ billion)
Source: IRDA, Company website, New India Assurance Annual Report, A.M. Best Europe Ltd, Alfred Magilton Best Company Limited
1.19
1.27
1.56
1.82
1.85
1.91
2.02
2.31
2.97
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
CAGR 12.04%

ICICI LOMBARD GIC
Source: ICICI Lombard Annual Report, IRDA, Company website, Aranca Research
 ICICI Lombard GIC Ltd is a 74:26 joint venture between ICICI Bank Limited, India’s second largest bank, and Fairfax Financial Holdings Limited, a
Canada-based diversified financial services company. The company launched its Initial Public Offering in September 2017.
 It has a market share of 8.39 per cent in the non-life insurance sector in FY16
 As of FY16, ICICI Lombard GIC had 257 pan India branches with an employee strength of 7,954
 Company’s Gross Direct Premium increased from US$ 812.5 million in FY09 to US$ 1704.1 million in FY17 at a CAGR of 9.7 per cent over
FY09-17. The gross written premium reached Rs 3,234 crore (US$ 503 million) in Q2 FY18.
4.0
4.5
5.6
7.6
9.2
11.2
13.8
15.8
17.7
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
812.5
723.6
966.4
1143.1
1182.0
1183.5
1146.9
1269.1
1704.1
0.0
200.0
400.0
600.0
800.0
1000.0
1200.0
1400.0
1600.0
1800.0
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
Gross Written Premium (US$ million) Number of policies issued (million)
CAGR 9.70% CAGR 20.46%

INDUSTRY ORGANISATIONS
3rd Floor, Parisrama Bhavan, Basheer Bagh, Hyderabad–500 004
Phone: 91-040-23381100
Fax: 91-040-66823334
E-mail: irda@irda.gov.in
Insurance Regulatory and Development Authority (IRDA)
5th Floor, Royal Insurance Building, 14, Jamshedji TATA Road,
Churchgate, Mumbai–400020
Phone: 91-22-22817511, 22817512
Fax: 91-22-22817515
E-mail: gicouncil@gicouncil.in
General Insurance Council
4th Floor, Jeevan Seva Annexe Bldg. S. V. Road, Santacruz (W),
Mumbai–400054
Phone: 91-22-26103303, 26103306
E-mail: ninad.narwilkar@lifeinscouncil.org
Life Insurance Council

GLOSSARY
 CAGR: Compound Annual Growth Rate
 IRDA: Insurance Regulatory and Development Authority
 IPO: Initial Public Offering
 FDI: Foreign Direct Investment
 LIC: Life Insurance Corporation of India
 GIC: General Insurance Corporation of India
 NBFC: Non-Banking Financial Company
 NGO: Non-Governmental Organisation
 RSBY: Rashtriya Swasthya Bima Yojana
 PFRDA: Pension Fund Regulatory and Development Authority
 GDP: Gross Domestic Product
 ESIC: Employees State Insurance Corporation
 FY: Indian Financial Year (April to March)
 So, FY12 implies April 2011 to March 2012
 GOI: Government of India
 INR: Indian Rupee
 US$ : US Dollar
 Where applicable, numbers have been rounded off to the nearest whole number

EXCHANGE RATES
Year INR Equivalent of one US$
2004–05 44.81
2005–06 44.14
2006–07 45.14
2007–08 40.27
2008–09 46.14
2009–10 47.42
2010–11 45.62
2011–12 46.88
2012–13 54.31
2013–14 60.28
2014-15 61.06
2015-16 65.46
2016-17 67.09
Q1 2017-18 64.46
Q2 2017-18 64.29
Year INR Equivalent of one US$
2005 43.98
2006 45.18
2007 41.34
2008 43.62
2009 48.42
2010 45.72
2011 46.85
2012 53.46
2013 58.44
2014 61.03
2015 64.15
2016 67.21
H1 2017 65.73
Exchange Rates (Fiscal Year) Exchange Rates (Calendar Year)
Source: Reserve bank of India, Average for the year

DISCLAIMER
India Brand Equity Foundation (IBEF) engaged Aranca to prepare this presentation and the same has been prepared by Aranca in consultation
with IBEF.
All rights reserved. All copyright in this presentation and related works is solely and exclusively owned by IBEF. The same may not be reproduced,
wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or
incidentally to some other use of this presentation), modified or in any manner communicated to any third party except with the written approval
of IBEF.
This presentation is for information purposes only. While due care has been taken during the compilation of this presentation to ensure that the
information is accurate to the best of Aranca and IBEF’s knowledge and belief, the content is not to be construed in any manner whatsoever as a
substitute for professional advice.
Aranca and IBEF neither recommend nor endorse any specific products or services that may have been mentioned in this presentation and nor do
they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed on this presentation.
Neither Aranca nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any
reliance placed or guidance taken from any portion of this presentation.

Insurance Sector Report November 2017

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Insurance Sector Report November 2017