Indian Life Insurance –

The Road Ahead

Abhinav Rahul
Vice President – Corporate Communications
Max New York Life Insurance
Agenda
Needs and financial instruments
Indian life insurance sector at inflection point
Life Insurance sector – reasons for a bright future
Life Insurance sector as career choice
Needs and
Financial Instruments
Protection
 Life Stage Needs
 Life Insurance – Needs it serves
 Financial needs vary with life stages
First Job Child Child Education & Retirement
Marriage Career Progression Marriage

Dependency Self Dependency

Post retirement planning

Child Birth House Children’s Marriage

0 Years 25 Years 60 Years 75 Years

Spending years Earning years Spending years

It is important to save to reach these milestones
BUT

Life line can break

ANYTIME
An ideal financial planning pyramid

HIGH RISK &

HIGH RETURN
Art, Wine , Derivatives
etc.

CAPITAL AT RISK &

MODERATE RETURN
Stocks, Mutual Funds,
Commodities
CAPITAL GUARANTEE & LOW RETURN
FD, PPF, Annuities etc.

PROTECTION - Life & Health Insurance

Protect against uncertainties…

?
Death

Disease Disability

Life is
full of
worries

? ?
…and plan for life stage needs

First Car

Retirement First House

Marriage of
Marriage
Children

Children Children
Education Birth
Selection depends on tenure

Saving Tools

Shares Fixed Govt Savings PPF, EPF Wine, Gold, Property Life
& MF deposits Bonds • Savings Artifacts ETF Insurance
AC
• NSE
• KVP
Selection depends on risk appetite

Saving Tools

Savings Fixed Govt PPF, EPF Life Gold, Shares Property Wine,
Artifacts
• Savings deposits Bonds Insurance ETF & MF
AC
• NSE
• KVP
 Some important statistics
Max New York Life – NCAER India Financial Protection Survey found
Saving Trends in India Figures in %
Improve Buy Gifts,
Buy or
Education Old Social or consumer donations
Emergencies build
of children age ceremonies enlarge durable and
house
Savings business goods pilgrimages
All india 82.8 80.9 68.9 62.7 46.8 46.8 22.4 18.4
Rural 81.2 79.0 66.7 63.9 44.8 43.5 19.8 17.5
Urban 86.6 85.3 73.9 60.1 51.5 54.4 28.5 20.4

But Where Are They Saving ?

Savings Co-operative
Keep at home Bank Post Office Insurance Others
forms Society
Percentage 35.8 50.9 5.0 3.2 2.2 2.9
Are Indian consumers saving
the right way

?
Are they protected
Role of Life Insurance
Life Insurance

Protection Long –Term

Wealth Creation
8-10 Times
your
income
Provides
Continuity of income Children’s education

Mortgage protection Marriage expenditure

Protection against disabilities Retirement fund

Indian Life Insurance –
at the inflection point
10 years of private life insurance
 Regulatory agenda
Future gazing – the next decade
1st decade of privatization was eventful
Life Insurance
FY 01 FY 04 FY 10

Number of players 1 14 23

Premium income* 1,947 2,873 9,432

(US$ million)

Insurance premium ~1.2% ~2.3% >4.2%

as % of GDP

Insurance premium ~7 14.75 41.2

per capita (US$)
LIC market share (%)* 100 78 34

*Individual FYP adjusted for 10% single premium

Source: IRDA, Swiss Re sigma

Changes over the last decade
Products – Traditional endowments to ULIPs
Distribution – Agency to multi-channel
Service – Customer query resolution to CRM
Brand – Category promotion to brand awareness
Customer – 40-50 years old to 25-45 years old
Some more
Tax Savings to invest / savings
Higher case size
Strong underwriting
Regulations focusing on core value of life insurance
Recent regulations step in the right direction
Focus on improved customer centricity
Reposition life insurance to its core purpose
 Long-term savings and protection
Some changes need to be considered
Exit barrier for customer to serve long-term needs
Reconsider minimum guaranteed returns in pension
plans
Provide access to long-term investment instruments
Regulatory changes
ULIP Changes Impact

Five Years Lock in • Brings life insurance focus back to longer term
and Premium • Focus persistency for income from renewals
Payment Term

Increase in • Focus on the protection needs

minimum sum • Maximize protection multiple
assured

• Will allow the customer to buy the product with

Net Reduction in
Yield for Every higher confidence
• Will make customer stickiness dependant on sales
Year from Year 5
pitch
Regulatory changes
ULIP Changes Impact

Cap on Surrender • Sell for life stage needs to ensure long-term

Charges customer persistency

• No partial
withdrawals in • Pension products will be used for purpose they are
pension products bought – proposition needs to be revisited
• Investment policy inclination towards debt
• Minimum guaranteed
instruments
return

Even spread of
charges during the • Better commission earning if the customer
lock-in period completes the policy term
Proposed regulatory changes
Proposed Changes Impact

Change in corporate • Role of agent advisors and banks will enhance

agency & referral norms

• Minimum
performance
standards for agents • Will weed out non committed agent advisors
• Customer persistency • Enhanced customer trust on serious agent advisors
& commissions and increase in business opportunity
alignment
Proposed regulatory changes
Proposed Changes Impact

Expected change in
Traditional Plans • Will promote need based sales
norms

Mandatory need • Promote professionalism and need based sales

analysis
Key emerging trends
• Balanced product portfolio
• Traditional products and Universal life designs likely
Product to gain
• Simplicity of design

• Higher emphasis on improving knowledge and

Distribution productivity

• Needs based sales, transparency in transaction and

Persistency continued service will be the key to customer
retention
Key emerging trends
• Customer life time value
Customer • Distribution focused to CRM
centricity

• Corporate governance and financial reporting norms

Transparency • Risk based capital

• Review the overall business model in light of the price

Cost control
Life Insurance – continued
relevance
Economic and demographic factors
 Unfulfilled need for life insurance
India Will Drive Economic Growth in Future
 India’s GDP expected to grow faster than China by 2010 and overtake
USA by 2030
 Expected growth of 9% for FY11 (Vs 6.7% in FY09 and 7.2% for FY10)

 Per capita income is expected to touch Rs.18 lakh by 2050

 Rise in disposable income will drive savings and consumption
 Significant improvement in Consumer confidence
 Consumer confidence Index rose to more than 73% registering a 7.8%

increase in March 2010

 Working age population with rise faster than other economies of the
world
 Will contribute 136 million people to the workforce in the next 10 years
Life Insurance will remain important
Only financial instrument to offer protection
Helps in long-term contractual savings
Products aligned to various life stage needs
Low protection and need for deepening of
savings pool
Consumer needs life insurance primarily for
Savings and Protection

Consumer Research
Life Insurance – a career
choice
Opportunities in life insurance
 What makes it attractive
Opportunities in life insurance
Distribution
Direct selling
Third party selling
Marketing
Human Resource
Operations and customer service
Technical areas
Actuarial
Underwriting
Product Management
Investment
What makes it attractive career choice?
High growth
Significant contributor to economy
People oriented business
High scope for innovation
And
Performance driven compensation
Thank you
Abhinav Rahul
abhinav.rahul@maxnewyorklife.com
+91 98102 79666