Overview of Life insurance industry Date : 15.11.2017 INDEX 1. - PowerPoint PPT Presentation

Overview of Life insurance industry Date : 15.11.2017

INDEX 1. Meaning 2. Glossary 3. Type of Life insurance 4. How they earn 5. Industry evolution 6. World Data 7. Domestic Data 8. Risk 10. Data about major private life insurers 11. Annexure

1 Meaning

Life Insurance : Life Insurance Business means the business of effecting contracts of insurance upon human life, including any contract whereby the payment of money is assured on or the happening of any contingency dependent on human life, and any contract which is subject to payment of premiums for a term dependent on human.

2 Glossary

Term Description APE (Annualized Premium APE (Annualized Premium Equivalent) is the sum of annualized first year premiums Equivalent) on regular premium policies, and ten percent of single premiums, on the new business written during any period from both our individual and group customers. The APE is adjusted for any new business cancellations effected during the period. Bonus (to policyholders) The non guaranteed benefits added to a participating policy and represents the share of surplus distributed to the policyholders Expense of Management Cost or total cost refers to total expenses including commission and including provision for doubtful debts and bad debts Embedded Value (EV) The measure of the consolidated value of shareholders’ interest in the existing life insurance business. It represents the present value of shareholders’ interests in the earnings distributable from the assets allocated to the business after sufficient allowance for the aggregate risks in the business and is generally expressed as a sum of Adjusted Net worth and Value of In-force of business. Embedded value determined as per the requirements and principles prescribed in the Actuarial Practice Standard 10 issued by the Institute of Actuaries of India is referred to as Indian Embedded Value.

Term Description Persistency Ratio The ratio of policies remaining in force to all policies issued in the period 13 month/25 month etc, prior to the date of measurement and is referred to as 13th month/25th month persistency etc It is the percentage of policies that have not discontinued paying premiums or surrendered. It can be measured in terms of number of policies or in terms of premium. Value of new business VNB is the present value of expected future earnings from new policies written (VNB)” and “VNB margin during any given period and it reflects the additional value to shareholders expected to be generated through the activity of writing new policies during any given period. VNB for any period reflects actual acquisition costs incurred during that period VNB margin is the ratio of VNB to APE for any given period and is a measure of the expected profitability of new business

3 Type of Life Insurance

Participating Life Insurance Participating Participating Term Insurance Pension Health Insurance Types of Non- insurance Participating Endowment (Non Linked) Linked Pension Annuity Non Linked Life Participating (Unit Linked) Linked Health

4 How they earn

• Depends on Bonus Declared • Profit arise from premium and to policy holders on annual income from investments basis. • 1/9 th of the bonus is Non transferred to shareholders Participating Participating Product (Non linked) Non Health Participating insurance (Unit Linked) • Same like medicaim • Profit Primarily arise from charges levied on the policyholders funds net of expenses & claims

5 Industry Evolution

• 2000- IRDA Establishment 1999-2005 • Insurance industry privatised once again • 26% FII permission in equity • Major changes in regulation of linked and non- linked products(Reduction in commission, cap on 2006-2011 surrender charges, increase in lock in period) • Licencing of Bancassurance agents • 49% FII permission in equity • Corporate agents allowed to tie up with more than 2012-2016 one player

6 Story in Chart- World Insurance Data

WORLD LIFE INSURANCE MARKET Life insurance market Share Population Share 58% 38% 33% 23% 16% 10% 8% 8% 3% 2% 1% 1% ASIA LATIN NORTH AFRICA OCEANIA EUROPE AMERICA AMERICA

LIFE INSURANCE PREMIUM MARKET SHARE Advanced economies Emerging economies 3% 7% 18% 97% 93% 82% 1995 2005 2015

16.7% 16.2% 11.5% 7.2% LIFE INSURANCE PENETRATION AS % OF GDP 7.6% 7.4% 6.1% 5.5% 4.7% 3.7% 3.0% 3.5% 3.2% 3.0% 2.8% 2.7% 2.3% 2.3% 0.6% 0.5% 0.3%

3700.03 3598.70 3033.30 2894.50 2803.00 LIFE INSURANCE DENSITY IN US$ 2227.00 2049.60 1724.90 1558.50 1150.00 616.00 353.00 298.30 298.00 222.00 195.50 46.50 22.40 21.20 9.20

7 Story in Chart- Domestic Insurance Data

LIFE INSURANCE COVERAGE 63.20% SUM ASSURED AS % OF GDP 62.60% 60.50% 59.00% 51.80% 51.50% 49.50% 49.40% 48.10% 47.40% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

LIFE INSURANCE PREMIUM HISTORY Rs. In Bill. Renewal Premium New Business Premium Total Premium Expon. (Total Premium) 4179 3666 3279 3136 2910 2873 2868 2649 2429 2279 2219 2148 2006 1940 1798 1750 1731 1652 1558 1556 1387 1348 1258 1196 1142 1131 1093 1076 1070 930 871 804 754 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

TOTAL PREMIUM GROWTH( YOY %) 35% 29% 30% 25% 19% 20% 14% 15% 12% 11% 10% 9% 10% 5% 5% 0% -1% 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 -5%

PREMIUM PROFILE Non Linked Linked 12% 13% 13% 13% 17% 24% 36% 37% 41% 44% 46% 88% 87% 87% 87% 83% 76% 64% 63% 59% 56% 54% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

PRIVATE PLAYER-MIX Linked Non Linked 12% 13% 14% 17% 21% 35% 46% 55% 55% 55% 56% 88% 87% 86% 83% 79% 65% 54% 45% 45% 45% 44% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

TREND IN MARKET SHARE-INDIVIDUAL WRP PREMIUM LIC Private Sector 64% 63% 62% 62% 57% 54% 54% 52% 52% 51% 50% 50% 49% 48% 48% 46% 46% 43% 38% 38% 37% 36% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

INDUSTRY MARKET SHARE TOTAL PREMIUM 9% 2% 3% LIC 5% ICICI Pru Life 5% HDFC Standered SBI Life 5% Max Life Bajaj Allianz 72% Others

INDUSTRY MARKET SHARE NBP 10% 2% LIC 2% ICICI Pru Life 6% HDFC Standered 5% SBI Life Max Life 4% Bajaj Allianz Others 71%

PRIVATE PLAYER-MARKET SHARE TOTAL PREMIUM 19% ICICI Pru Life 32% HDFC Standered SBI Life 17% Max Life Bajaj Allianz 5% Others 18 Players 9% 18%

PRIVATE PLAYER-MARKET SHARE NBP 16% ICICI Pru Life HDFC Standered 34% SBI Life Max Life 17% Bajaj Allianz Others 18 Players 6% 20% 7%

8 Risk

Variation in Changes in persistency regulations experience Interest rate Concentration fluctuations Risk

9 Data of Major Private Sector Life insurers

Business Performance Data of Key Private Players Click Here : This document contains comparative analysis of five biggest private sector life insurers of India

10 Annexures

Sources of information : 1. IRDA 2. Company Reports 3. Swiss Re Reports

Basic Premium Calculation Table :

Commission structure for regular premium based insurance products linked and non-linked : Premium paying Terms Maximum Commission or Remuneration in any form as % of premium 1st Year Renewal Premiums 5 15 7.5 6 18 7.5 7 21 7.5 8 24 7.5 9 27 7.5 10 30 7.5 11 33 7.5 12 years or more 35 7.5

Brochure of ULIP Policy : Click here to see the PDF of brochure *Just for illustrative purpose only.

Sample of financial statement of Life insurance company: Click here to see the PDF of brochure