Research partner: Dun & Bradstreet (D&B)

An explorative study that delves into how the insurance industry can begin tapping the immense opportunity that India presents.



Note: This publication is produced by Wipro Limited and is for private circulation to its customers. The research has been undertaken and executed by Dun & Bradstreet Information Services India Private Limited.

Table of contents
Preface Executive Summary Research Framework Section I: Indian Insurance Landscape 2 4 6 7

India’s insurance penetration and density indicate tremendous potential for growth 8 Insurance industry is a significant contributor to the Indian economy Regulatory changes play a critical role in the insurance business Section II: Emerging Trends in Insurance Industry Socio-Economic Trends Diverse consumer needs will necessitate product customization Focus will shift to multi-channel distribution model Micro-insurance: one of the essential tools to achieve financial inclusion Macro Industry Trends Health and motor insurance will lead the non-life segment; proper ty insurance market offers huge potential Private entities to play a greater role Life insurance industry at the threshold of a new growth phase Regulatory Environment Regulatory changes will improve risk management, transparency and supervision Technology Embracing new technology will enable business growth Section III: Conclusion References & Sources Acknowledgements 25 27 28 29 29 31 31 35 38 39 10 11 13 16 16 18 24 25


The insurance industry is in the midst of an exhilarating journey. The industry has grown significantly over the past decade as evident from the surge in insurance penetration and density levels. Further regulatory reforms, particularly in the past few years have stabilized and created a favourable environment for the industry to grow further. These policy measures have led to the opening of the industry for private participation resulting in enhanced competition and changes in product pricing. However there needs to be consistent effort on the part of Government, industry players and regulatory authorities to create an environment conducive for the industry to rise beyond the existing levels. Post liberalisation, the insurance industry is undergoing constant changes in terms of innovative products, alternate distribution and marketing channels, use of technology, improved customer service, demographic shifts, changing customer behaviors etc. Insurers need to swiftly adapt to these changes and create suitable business models to explore full potential of the insurance market. Further with changing dynamics of the economy, insurers are coping with challenges related to new emerging socio-economic, business and regulatory environment. Strategies that focus on long term sustainable growth will hold the key for survival and development of the industry. Against this backdrop, Wipro Limited in association with Dun & Bradstreet brings to you “Future Thought of Business: Insurance Industry”. This is an endeavour to highlight the emerging trends of the Indian insurance industry and the potential that the industry holds in the coming decade. I hope you enjoy reading this report and look forward to receiving your suggestions.

Anuj Vaid
General Manager and BFSI Vertical Head, Wipro Infotech



Untold riches await those with a sense of direction.

The Indian insurance industry is turning out to be one of the most lucrative emerging industries in the world. The industry has grown significantly in the past few years as is evident from the increase in insurance penetration and insurance density. All the stakeholders in the insurance value chain have contributed to the growth and development of the insurance industry. The last decade has witnessed the rise of new players, innovations in product designing, development of alternative distribution channels, and an improved regulatory framework. However, the industry also faces some challenges in the form of dynamic market conditions, changing customer behaviour, demographic transition, regulatory environment, and turmoil in the macro-economic environment. Going forward, the insurer’s response to these challenges will decide the future course of the industry. Future Thought of Business: Insurance Industry endeavours to recognise and analyse these future trends that will shape the future of the insurance industry in India. Some of the key findings from the study of future trends in the insurance industry are as follows: • The growth of the insurance industry will largely be driven by factors such as changing customer behaviour, financial literacy, demographic transition, macro-economic environment, regulatory environment, and technology. These factors will shape the future trends of the insurance industry in all its forms: life, non-life and pension. • Insurers will turn to a ‘customer centric’ strategy to meet needs of a dynamic insurance market. Products will be customized to suit customer needs and preferences. With rapidly changing patterns of customer behavior, product innovation and customisation will become one of the key strategies for insurers to increase insurance penetration. • The new generation of customers will require fast and simple channels to buy insurance offerings. This will lead to the emergence of alternative distribution channels such as the Internet and social media. Insurers will shift focus from a traditional distribution model to a multi-channel distribution model. • Micro-insurance presents a significant opportunity for insurers to deepen insurance penetration. Insurers will have to customise insurance offerings keeping in mind the specific characteristics of the rural market such as irregular and low levels of income, poor insurance awareness, etc. • Besides the rural market, untapped market segments such as the urban poor also offer significant growth potential for insurers. Micro-insurance will be one of the key tools to achieve financial inclusion for this sector. • Insurers will focus on profitability and develop customer acquisition/retention strategies, product & distribution strategies accordingly. Also, prudent investment and stronger risk management practices shall become more prevalent. • The macro-economic and industry environment will have significant impact on the future of the insurance industry. The economy is currently facing high inflation which erodes the value of life insurance policies and pension plans. As this inflationary trend is expected to moderate in future, life insurances and pensions will begin a new growth phase. Health and motor insurance will continue to lead the non-life segment as better risk pricing and entry of new specialized players will spur its growth. • Regulatory changes will play a critical role for the insurance industry in bringing more flexibility to product innovation and pricing as well as in improving solvency and corporate governance. • As the insurance industry looks to achieve its full potential, technology will play a key role in realising full customer profiles, enhancing sales effectiveness, improving operational efficiencies and reducing delivery costs. • Technology will also enable an efficient claim management system as it can transform large amounts of unstructured data into meaningful data analysis for insurers to act upon. An improved claim management system will translate into improved customer service and fraud detection as well.


Objective of the Study The objective of the Future Thought of Business: Insurance industry report is to identify those trends likely to emerge in the coming decade that could significantly influence the future of business in the Indian insurance industry. It is an initiative to serve as a strategic platform tool for the industry to anticipate, strategise and tackle future challenges. Research Design The report has been developed based on quantitative and qualitative information. Data and information collection was conducted through secondary research and interviews with industry experts. Methodology 1. Desk research A detailed review of relevant literature for the Indian insurance industry was conducted at this stage. 2. Questionnaire development and industry interactions Findings of the desk research were used to develop appropriate questionnaires for interviews. Face-toface and telephonic interviews were conducted with experts in the industry. 3. Collation and analysis of information All data and information gathered through secondary research and interviews was collated and analysed for the purpose of developing the report. 4. Report writing Finally, the analysis, results, and key findings were presented in the form of the current report.



Indian Insurance Landscape

Insurance plays a crucial role in safeguarding the interests of the individual and of businesses. In today’s world, life and non-life (fire, marine, travel, health, accident, home, and motor) insurance are crucial as potential risks have increased manifold in every sphere of life. An efficient and effective insurance industry not only enables risk management practices but also mobilises saving and promotes investments, thus having a major influence on economic growth. Today, insurers globally are facing numerous challenges on account of disturbed financial markets, unstable macro-economic situations, and tightening of the regulatory environment. Competition, technological advances, and consumer preferences are gradually changing the face of the industry. Insurers realize that they need to adapt to these dynamic market conditions to sail across turbulent times for long term sustainability.

India has come a long way from the days when the insurance industry was exclusively dominated by a few public sector insurers. In recent times, the industry has seen the entry of private players in both life and non-life insurance sectors. After the introduction of the Insurance Regulatory and Development Authority Act (IRDA) in 1999 and opening of the sector to private and foreign players, India has witnessed a shift in industry dynamics such as the entry of international players, evolution of various types of insurance covers and innovative distribution channels.

India’s insurance penetration1 and density2 indicate tremendous potential for growth
Insurance penetration and insurance density are the two widely used parameters for the assessment of the potential and performance of the insurance industry. Since 2007–08 the Indian economy grew at an average rate of 7.7 % whereas for the same period insurance premium recorded a CAGR growth of 10.4 %. This faster growth displayed by the industry as compared to the economic growth is evidence of deepening insurance penetration. Overall insurance penetration increased from 2.32 % in 2000 to 4.10 % in 2011. Life insurance penetration has increased from 1.77 % in 2000 to 3.40 % in 2011 and non-life insurance penetration has increased from 0.55 % in 2000 to 0.70 % in 2011. Deepening of insurance penetration highlights the growing prominence of the insurance industry in India. Insurance density grew rapidly from US$ 9.9 in 2000 to US$ 59 in 2011. Insurance density However, when compared globally, India is still below the penetration and density levels of some other markets. Despite rising insurance penetration and insurance density, the Indian insurance market is still at an early stage of development thus demonstrating significant potential for growth in the insurance industry. This holds true for life, non-life, and pensions. Rising per capita income, growing awareness, increased private player participation, and technology enablers are some of the high growth drivers expected to aid the growth of the industry in the coming years. for life insurance industry has increased from US$ 7.6 in 2000 to US$ 49 in 2011 and for the non-life sector it has increased from US$ 2.3 in 2000 to US$ 8.7 in 2011.

1 2

Insurance penetration is defined as the ratio of premium underwritten to the GDP Insurance density is defined as the ratio of premium underwritten to total population


Global Insurance Penetration and Density (2011) Life Insurance
Premiums per capita in USD 4000 3500 3000 2500 2000 1500 1000 500 0 2 0 8 6 4 12 10 Insurance Penetration (%) 4.5 4 3.5 3 1000 500 0 2.5 2 1.5 1 Insurance Penetration (%) 5






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re U ni te d



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Source: ‘World Insurance Report 2011’ Swiss Re, D&B Research

Non-life Insurance
Premiums per capita in USD 2500 2000 1500







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ce te ni d K g in


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ap ng

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Source: ‘World Insurance Report 2011’ Swiss Re, D&B Research


Insurance industry is a significant contributor to the Indian economy
The insurance industry contributes significantly to the development of the Indian economy as the sector channelises household financial savings, which provides long-term capital for economic development. The sector receives a steady cash flow of insurance premiums or contributions whereas the liabilities are of long term or contingent nature. While on the one hand, insurance encourages saving habits, on the other, it strengthens the risk-taking abilities of both individuals and enterprises. The share of life insurance funds in total household financial savings has increased from 21.0 % in 2008–09 to 24.2 % in 2010–11. The share of provident and pension funds in household financial savings stood at 9.1 % in 2010–11.

As on 31st March (Rs bn) Total Investments of Life Insurers (a) Traditional Products Central Govt. Securities State Govt. and other approved securities Housing & Infrastructure Approved Investments Other Investments Total (b) ULIP Funds Approved Investments Other investments Total 3,116.69 258.71 3,375.40 3,718.99 272.17 3,991.16 3,463.40 236.32 3,699.72 3,604.47 1,372.36 856.75 2,570.84 344.77 8,749.19 4,209.52 1,737.33 891.81 3,049.77 421.59 10,310.02 4,680.82 2,145.15 973.20 3,851.07 462.62 12,112.87 2010 2011 2012

Grand Total (a) + (b) Source: IRDA Annual Report 2011 & 2012




As on 31st March (Rs bn) Total investments of Non-Life Insurers Central Govt. Securities State Govt. and other approved securities Housing and Loans to State Govt. for Housing & FFE Infrastructure Investments Approved Investment Other Investments Total Source: IRDA Annual Report 2011 & 2012 2010 160.38 69.71 47.90 103.73 242.56 39.44 663.72 2011 198.65 81.91 69.73 122.16 317.69 35.06 825.20 2012 242.41 93.39 81.79 151.98 385.63 37.49 992.68


Apart from its contribution in providing long-term capital, the insurance industry also generates employment opportunities in the economy directly or indirectly, such as for underwriters, brokers, actuaries, and financial advisors. Although the recent global economic slowdown and the increased use of technology in the industry has resulted in a decline

in the number of people employed by the industry, a lot of insurance advisors still depend on insurance for their livelihood. Many of these employment opportunities are created in rural areas. As on March 31, 2012, the life insurance industry has 248,703 direct employees and 2,345,601 individual insurance advisors.

Regulatory changes play a critical role in the insurance business
The insurance business is a tightly regulated industry with policy changes having a visible impact on the business in the short and long run. For example, changes in regulations, specifically governing the sales of unit-linked insurance products (ULIPs) negatively impacted the sales of life insurance policies. Life insurance premium registered a negative growth of 1.6 % in the financial year 2012 (FY12) compared to a growth of 9.9 % in FY11.

Life insurance total premium
2,500 2,000 Rs in Bn 1,500 1,000 500 40 30 20 10 -10 FY08







Source: IRDA Annual Reports, D&B research

India is still below the penetration and density levels of some other markets. What we are seeing currently, is merely the tip of the iceberg.


Detariffication and price deregulation, which started in 2007 for non-life insurance, initially decelerated growth but then resulted in better product customisation and risk pricing. Improved risk pricing lowered

the premiums in general, resulting in a spurt in the demand for non-life insurance. Non-life insurance premiums showed a healthy growth of 24.2 % in FY12 compared to a growth of 22.9 % in the previous year.

Non-Life gross direct premium
350 300 250 Rs in Bn 200 15 150 100 50 10 5 FY08

30 25 20 (%)






Source: IRDA Annual Reports, D&B research


Section 11:

Emerging Trends in Insurance Industry


After the first decade of liberalisation of the insurance industry in India, the industry is well-poised for the next leap forward. All stakeholders of the industry are working towards its development and to exploit the opportunities thrown up by the changing conditions of the market. Insurers are adapting to the constantly changing demographics and customer behaviour, as well as to new business and regulatory

environments that, going forward, will mould the future of the industry. Major impact factors that will influence the growth of the industry in the long run, include socio-economic changes, the macro-economic and industry scenario, the regulatory environment and technology.

• Macro-economic scenario • Life insurance industry • Non-life insurance industry

• Changing customer needs and preferences • Financial literacy • Financial inclusion • Social and financial behavior • Demographic transition


• Strength and quality of regulatory framework • Regulatory reforms • Risk management

• Interactive capabilities • Research and analytics • Response capabilities

These drivers will shape the future trends of the industry. For instance, rising awareness amongst the people of the country has led to wider adoption of insurance products and also to insurance gaining a significant share in their savings/investment portfolio. Insurance products and schemes are not looked upon as mere tax-saving or investment options any more, but are largely treated as a risk mitigation tool. However, a vast population continues to remain un-insured or under-insured. This can be seen as both a challenge and an untapped opportunity by the insurance companies.

Further, insurers are now focused more on profitability than on market share. This has been a key driver for them to review their business model, including aspects like product development, distribution and operating models, investment management, etc. The government and the insurance regulator are facilitating healthy and quality growth and development of the industry. They are ensuring protection of the policyholder and encouraging sustainable business and investment practices. Various attempts are being made by the government to drive financial inclusion as well. Technology will also play an important role in enabling business growth through transformation of large quantities of data into meaningful information.


These factors will impact all the segments of the industry and will shape the future trends of the insurance industry.


Insurance Value Chain Stakeholders Customers

Emerging Trends

Socio Economic Changes

• Diverse consumer needs will necessitate product customisation • Micro-insurance: one of the essential tools to achieve financial inclusion


Focus will shift to multi-channel distribution • Traditional model dominant; multi-channel distribution to evolve • Despite challenges bancassurance will continue to grow • E-commerce is acting as great facilitator, but is yet to gain full-fledged momentum • Use of social media will play a critical role for creating customer awareness

Macro-Economic and Industry Scenario


• Health and motor insurance will lead the non-life segment; property insurance market and offers huge potential • Life insurance industry at the threshold of a new growth phase

Regulatory Environment

Government/ Regulator

• Regulatory changes will ensure risk management and improve transparency and supervision



• Embracing new technology will enable business growth, facilitate viable business models, improved information management and exchange across stakeholders


Socio-Economic Trends
Socio-economic changes such as social and financial behavior, improving financial literacy, and demographic transition will influence the overall market of the insurance industry. Insurers will have to identify and anticipate changing customer behavior to bring required changes in their business strategy. The following trends have been observed in the industry:

Insurers will have to customise products to match changing consumer needs and preferences as well as social and financial behavior. For instance, with the increasing number of working women in the country, the demand for women-oriented life insurance policies is likely to increase. Similarly the demand for children-specific policies, pay-out for which can coincide with significant milestones in their lives, may gain momentum in the future. Many insurers sell the traditional insurance products with some variations. However, first mover insurers who have come up with product innovations have grown rapidly in certain segments. For instance, market-linked insurance products, Unit Linked Insurance Plans (ULIPs), met with great success initially when they were introduced to customers during a buoyed market. Another example of product customisation and product innovation is the job loss protection insurance offered by car maker Hyundai in the US in 2009, when it Product innovation and customisation has been used as one of the key strategies to increase penetration in insurance markets. Insurers largely bring customisation through either modification of existing terms and conditions of traditional insurance policies or the bundling or unbundling of different risk covers. Innovation and customisation in insurance products will be the key differentiator for the scalability and sustainability of the insurance business. Enabling regulations can play a crucial role in enlarging the scope of product customisation and innovation. Some examples of product customisation have been observed in the agricultural sector as well. bundled insurance cover with the sale of a car by providing the option that the customer could return a recently purchased car in case of losing employment.

“Need for customisation has become the norm for today. One size no longer fits all! Customers demand individual attention and products that cater to those needs. With the rising level of awareness and confidence, customers would seek specific benefits suitable for their lifestyle and requirements.” Mr. Antony Jacob, CEO, Apollo Munich Health Insurance Company Limited

The Indian economy is predominantly reliant on the agricultural sector. In this sector, there are primarily two types of inherent risk that can impact the income of stakeholders; namely price risk and production risk. Index-based weather insurance products are innovative alternative products developed recently to mitigate these risks in agriculture. Many

private insurers in India have launched index-based weather insurance. The Government of India (GoI) launched the Weather-Based Crop Insurance Scheme (WBCIS) to boost the market for index-based weather insurance.


The Indian Weather-Based Crop Insurance Scheme – WBCIS
Agricultural Year Farmers insured Sum Insured (US$ Mn) Commercial Premium Volume (US$ Mn) 33.1 18.6 99.9 258.9 Claims Paid (US$ Mn) Claims payments as a multiple of commercial premiums 72% 77% 62% 48%

2007-08 2008-09 2009-10 2010-11

678,425 375,100 2,278,407 9,278,000

398 208 1093 3174

23.9 14.2 62.0 125.0

Source:World Bank
According to the World Bank report, the weather index insurance market in India is the world’s largest, covering more than nine million farmers. With the support of government programs and private participation, index-based weather insurance products will continue to grow in India.

“Future of insurance will be determined more by identification of changing customer needs. Specific needs or demand or desires of a customer will drive innovations in this business.” Mr. Amitabh Chaudhry, MD and CEO, HDFC Life

IRDA has also permitted insurers to combine life plus health cover to offer integrated products to policy holders. Policy holders can use these product innovations to avail life as well health cover under one umbrella. These products can also allow insurers to tie up with other partners to offer life plus health 'combi plans' and use the existent distribution network of their partners. Embracing new technology can enhance the capabilities of insurers to understand evolving markets and clients’ needs and preferences. We have seen quite a few cases of product Innovation, enabled by technology solutions. • Improved data analytics (e.g. customer analytics, etc.) and management processes can enable insurers to customise products to suit changing needs and preferences. Emergence of the Internet, social media, and other smart technologies, has significantly impacted the availability of unstructured data. Insurers need to make full use of these data by developing data analytics capabilities. Data analytics technologies such as customer analytics can process unstructured data into meaning-

ful structured information helpful for decision-making in areas such as product customisation, product pricing, or product underwriting. • Travel insurance can be issued along with airline ticketing itself. This is because the ticketing system is integrated with the core insurance systems via Service-Oriented Architecture (SOA) and Enterprise Application Integration (EAI) technology. • One of the critical factors for the success of the weather-based crop insurance scheme in India is the rapid advancement of remote sensing technology used for loss assessment. One of the big malaises of National Agricultural Insurance Scheme (NAIS) was its loss assessment procedure which was largely addressed by reliable and cost effective remote sensing applications. • Another example of technology that can help product design is usage-based insurance like ‘pay as you drive insurance’. Telematics has ensured that this kind of product sees the light of day. For this type of motor insurance, technology is required to capture the driving behavior data of the user, based on which cost of insurance is determined.


“Industry right now is focused on the same kind of segment, same kind of products. The industry should get into more innovation either on the servicing front, product development or alternate distribution channels and that is really going to help the growth of the industry.” Dr. Amarnath Ananthanarayanan, CEO and MD, Bharti Axa General Insurance

Distribution channels are of prime importance in value creation for the business of insurance. Traditionally these channels have been dominated by insurance advisors who interact personally with customers, understand their needs, and then offer insurance products. A shift in demographics has led to the emergence of a young generation of customers who look for speed and simplicity in the way they are offered insurance products. This has brought direct channels such as the Internet and social media as powerful alternatives in the distribution models of insurers. In the near future, the multi-channel sales approach will emerge as the key driver for growth in insurance. Innovation in marketing and distribution channels will enable insurers to reach a wider range of customers and penetrate the potential market.

“Innovation in sales and distribution is clearly an area of improvement in the industry.” Dr. Amarnath Ananthanarayanan, CEO and MD, Bharti Axa General Insurance

Multi-channel distribution can contribute by A. Providing access/reach to customers/markets
With ample opportunities available for market penetration, it has become essential to employ various channels to maximise the power of networking in order to reach out to more customers. Some areas that have seen trends to attempt improved reach to customers/markets are (i) the traditional agency model, (ii) bancassurance, (iii) e-commerce, and (iv) social media.

B. Maximising efficiency/effectiveness of various channels
Multi-distribution channels act as catalysts in building a large customer base. However, while the channels for distributing insurance products have improved over the last decade, there is a lot more that needs to be done to improve the efficiency and effectiveness of these distribution channels.


A. Trends observed in providing access/reach to customers/markets
Traditional model dominant; Multi-channel distribution to evolve
The traditional agency channel of individual insurance advisors continues to hold a prominent position in insurance distribution. In FY11 individual insurance advisers contributed approximately 97 % of the total business for Life Insurance Corporation of India (LIC), which holds more than 70 % of the market share of the life insurance business. For private sector insurers, the contribution of this channel was almost 47 %. Many customers obtain preliminary information about policies through different channels but before deciding to buy a policy, the customer generally prefers meeting an individual local advisor for a comprehensive discussion. This is especially true in cases of life insurance. Due to the persisting geographical and infrastructure challenges to the distribution of insurance products, this traditional channel is expected to continue to hold significance in the near future. However, the profile of traditional advisors is expected to change from a part-time insurance advisor, who is a mere contact point between insurance company and customer, to a full-time independent financial advisor. At the same time, to meet the requirements of this socio-economically diverse country, insurers will have to adopt a wider range of alternative channels to tap new market segments which are currently under-served by traditional channels.

“Trusted advisor is an important component of the insurance sales channel and for complicated products where more detailed planning is required; they have a very important and integral role to play.” Mr. Amitabh Chaudhry, MD and CEO, HDFC Life

Transition from traditional model to multi-channel distribution model
Traditional Model Multi-channel Distribution Model



Mature Market

Source: IRDA Annual reports, D&B Research


Despite challenges bancassurance will continue to grow
Bancassurance is the distribution model where insurance products are distributed through the banks’ branch networks and other bank channels. Bancassurance commenced in the year 2000 when the government allowed banks to undertake insurance distribution and it grew rapidly once IRDA notified ‘Corporate Agency’ regulations in 2002. Regulatory reforms proved to be the key driver for the rapid growth of bancassurance. For insurers, bancassurance is an opportunity to expand their distribution network rapidly at low cost and cover market segments not served previously. For banks, it is an opportunity to generate a fee-based income.

“Insurance in India will continue to be sold through the agency channel even in the near future. Bancassurance does have an important role to play in increasing penetration, providing access to over 600 crore bank account holders, which cannot be accessible otherwise by the agency route across the country.” Mr. Antony Jacob, CEO, Apollo Munich Health Insurance Company limited

Despite its late start, bancassurance (including referrals) accounts for 25–30 % of the premium income of private insurance companies (IRDA report). With a network of more than 80,000 branches all over the country, banks have the potential to achieve financial inclusion by offering insurance products as well. Moreover, with the introduction of

banking concepts like ‘relationship banking’ and ‘priority banking’, bancassurance has found increased traction in recent years. For instance, the share of bancassurance in new business premiums of life insurers has more than doubled from 4.6 % in 2004–05 to 11.3 % in 2011–12.

Share of bancassurance in new business premiums of life insurers
12 10 8 6 4 2 0

Share (%)

5 -0 04 0 2

8 -0 07 0 2

9 -0 08 0 2

1 -1 10 0 2

20 06 -0 7

Share of bancassurance

Source: IRDA Annual reports, D&B Research

20 09 -1 0

20 11 -1 2


The bancassurance channel is still under-utilised and has great untapped potential. As per the IRDA report on bancassurance, not even 10 % of housing advances are covered by either credit life or mortgage insurance. The current global financial crisis and weak macro-economic situation has contributed to some extent in the fall of bank-distributed

insurance products. These challenges have compelled insurers to explore other alternative channels as well, to increase insurance penetration. Despite these current difficulties, bancassurance is expected to account for a major share of new business in the years to come.

“Banks will continue to be a major lead providing and distribution channel. However specific needs of bank customers will be a source of product development. A big chunk of product development will come from bank customer related insurance requirements or bank protection related insurances.” Mr. Srinivasan Kalambur, Former whole-time member, IRDA

E-commerce acting as a great facilitator but yet to gain full-fledged momentum
The Internet is a rapidly evolving distribution channel for the insurance industry. Increasing consumer awareness and an e-savvy population will have a positive impact on the demand for insurance products. Since the Internet is a convenient, fast, and low-cost channel, many insurers have started selling insurance products like term insurance and motor insurance through e-distribution channels. Also using the Internet can benefit customers in terms of time efficiency, e.g. in comparing various policies or buying policies online, or while increasing cover or adding a new member. Due to growing consumer awareness about insurance products in general and the Internet as a medium for insurance in particular, the medium is gaining popularity with middle and high income classes in urban areas.

“Online channel is likely to grow exponentially in the next couple of years. After traditional agents and bancassurance, it could over the next five years become a sustainable third significant distribution channel for the insurance companies.” Mr. Gaurav Rajput, Director Marketing & Products, Aviva Life Insurance

As per estimates, around 121 mn people (10.2 %) out of more than 1.18 bn people in India have access to the Internet (source: internetworldstates.com). Considering the potential of the Internet, insurers will develop better e-strategy to use it for the sourcing and marketing of insurance business. The Internet as a medium can be used effectively to market insurance products, to create consumer awareness,

and to increase penetration. However its use to distribute complex insurance products has not made a significant impact so far because of the need of substantial personalised advice in the selling of insurance products. Nevertheless, the Internet is a source of vital information to enable decision-making about these insurance products, as it enables customers with first-hand basic policy information and comparative data.


Technology plays an important role in the marketing of insurance products. Most insurers have websites which they use for online sourcing and marketing. Thus technology also gives an easier and cost-effective distribution option. At present the Internet and other online options share a small portion of the overall insurance business but the share will continue to grow due to increasing Internet users in the country.

Many customers today use online insurance portals only for initial research; while a small proportion buys insurance online. Going forward, we expect this trend to inverse with online emerging as a significant channel for buying insurance products.” Mr. Gaurav Rajput, Director Marketing & Products, Aviva Life Insurance

Use of social media will play a critical role for creating customer awareness
Another emerging trend that the industry will experience is the extensive use of social media for marketing and creating customer awareness about insurance products. Recently one of the private players used social media to give a marketing push to its insurance business in India. Through this campaign, the company could reach potentially 60 mn users in India with negligible marketing costs. Many insurers have already been using social media effectively for marketing their insurance products. Another example of using social media as a platform is the ‘Education is Insurance’ program run through a social media campaign. Demographics offers a huge opportunity for social media to succeed as a marketing channel for insurance since almost half of the country’s population is under the age of 25, the chief users of social media. Insurers will need to use social media more effectively to create awareness among the young generation customers.

“Marketing of simple plain vanilla type of products will be taken over by e-channels. This is already happening in other developed markets but given the high level of IT competencies available in the country the adoption of E Channels will be a fast process.” Mr. Srinivasan Kalambur, Former whole-time member, IRDA


It is clear that insurers will have to innovate, combine, and develop multiple distribution channels as a successful distribution model to meet the diverse needs of customers. • Role of internet and social media will be very critical in the overall marketing of insurance products. • Concepts such as worksite marketing, wherein voluntary insurance products are offered to employees at the worksite with either sponsorship or backing from employers, will help in targeting a larger customer base with minimal resources.

• Given the complexity of some insurance products, direct marketing or selling can act as a successful alternative distribution channel as it facilitates two-way communication and enables addressing of client queries and feedback about insurance products. • Shopassurance is another channel wherein shopping malls and retail outlets can be used as an effective medium to target a large number of potential customers. In short, innovation in marketing will be critical for distribution in the insurance business to reach target customers.

B. Trends observed in maximising efficiency/effectiveness of various channels
Overcoming roadblocks for improved efficiencies in insurance through banking Though bancassurance has been growing strongly, there are certain challenges faced by insurance companies under this distribution model. • Inability of banks to process available data, exploit the full potential of their existing bank customer profile, and sell complicated insurance products. Technology can play an important role in improving the process of data management and enabling banks to realize the full potential of customer profiles. Credit card business units do track category spends, and can provide useful insights into consumer buying behavior. • Hosted platforms for health/group insurance; • Low level of training, monopolistic relations, non-utilisation and resistance to the technology platform, and poor servicing standards are a few other challenges observed by industry experts. Servicing can be enhanced in various ways, needing a well-integrated environment among the insurance and banking partners. • Sales process simplification; • Process automation; and • Using social media for contacts, access, updates, etc. • Lead management is left to individual sales personnel, and lacks an organizational view. Prospects needing insurance may be lost due to such inefficiencies. For most of the above, the background systems need to be well-tuned to enable sales effectiveness. The regulator is also trying to promote standardisation, to enable exchange of information among industry participants. A few insurance companies have critically reviewed their setups and have initiated deliberations on • Enterprise application architecture; • Application portfolio rationalisation;

Sales effectiveness of channels: issues and opportunities • Various distributing channels function in isolation, not leveraging the strengths of each other. On the contrary, at times, we observe channel conflicts. Also, each channel gives a different experience to each prospect/customer. An integrated setup can ensure that customer experience is superior and uniform across all channels.


Financial inclusion plays a crucial role in empowering weaker sections of society who are otherwise denied access to financial services such as banking and insurance. Micro-insurance is one of the essential tools to achieve financial inclusion since in the event of any unforeseen contingencies weaker sections of society can slip back into poverty. The objective of micro-insurance is to extend the umbrella of insurance to a larger section of population currently under-served by traditional insurance. Micro-insurance is designed for low-income people and is characterised by low premium and low margin. Since a majority of the population resides in rural areas, micro-insurance will be an effective channel to meet the basic insurance needs of the low income rural population. Catering to the urban poor population as well, offers a potential market for micro-insurance to penetrate as this section of the population remains deprived of insurance coverage. Currently micro-insurance largely operates through ‘The partner-agent model’ where micro-finance institutions partner with insurers to distribute micro-insurance. However insurers will now start exploring other alternative channels for distributing micro-insurance. Insurers have been working with Non-Government Organizations (NGOs) successfully to help micro-insurance reach rural parts of the country. Insurers are also relying on retailers who can provide easy access to a wider range of lower income households which generally buy goods and services from such retailers. Even organised retailers can emerge as an important distribution channel where they can act as a corporate agent or as a referral. Such channels are commonly found in the UK. The Government of India launched the Rashtriya Swasthya Bima Yojna (RSBY) initiative in 2008 to provide health insurance coverage for Below Poverty Line families. These micro-insurance initiatives are an attempt to extend insurance coverage to the low-income population. Strong growth in micro-insurance will require product customisation in terms of design, technology, pricing, and distribution channels.

“While micro finance is an opportunity, insurers need to have a smart distribution strategy in place, build certain simplistic products and have simple operational processes.” Mr. Gaurav Rajput Director Marketing & Products, Aviva Life Insurance

One of the key growth drivers for micro-insurance will be financial literacy. Limited knowledge of the concept of insurance leads to lower awareness of insurance products and services among the general public, specifically in semi-urban and rural areas. It is imperative that all stakeholders promote financial literacy among the general public to make micro-insurance successful. IRDA has been constantly taking steps such as publicity campaigns to increase knowledge and awareness about insurance products and services among the general public.

There are other challenges in micro-insurance like the need to develop profitable products with low margins or customised products for low-income customers. For micro-insurance to succeed, insurers need to use technology and existent distribution networks such as those of microfinance institutions or NGOs to reduce the cost of delivering micro-insurance products and to make them viable in the long term.


“For micro-insurance to succeed, it’s important to have an existing distribution tie up that one can leverage. Also it’s a difficult model to crack so insurers can tie up with micro-finance companies and RRBs to try and reach out to customers.” Mr. Gaurav Rajput, Director Marketing & Products, Aviva Life Insurance

One of the key drivers for micro-insurance is corporate social responsibility. In future, insurers will need to re-design strategies ensuring an effective balance between social obligations and profitability to make micro-insurance successful. Technology adoption is being seen in micro-insurance as well. • It is a no-brainer that for micro-insurance, volumes will drive its viability. Like for the mutual fund industry, shared infrastructure could provide the necessary scale. Some insurers round the globe have

started running micro-insurance platforms on Cloud technology for conducting their micro-insurance business. This comes at a low per transaction price. The adoption of a few of these new technology offerings could catapult the growth of the micro-insurance market. • For the rural market, OTC (over-the-counter) fulfillment could help kill some of the costs. Technology solutions can help provide that, without compromising on the underwriting and without leaving scope for fraud.

MACRO INDUSTRY TRENDS Health and motor insurance will lead the non-life segment; property insurance market offers huge potential
The non-life insurance industry plays an important role in risk management by protecting individuals against the hazards of life such as property loss or health deterioration. The economy is exposed to various kinds of natural calamities, risks which are still largely not covered; therefore fire and liability insurance are very critical for the safety of large turnkey projects. Owing to the billion-plus population, there is a huge untapped potential in the country for the health insurance market too. Increase in government spending on healthcare and education will provide an enabling environment for the growth of non-life commercial and personal insurance. The non-life industry has also been witnessing a series of regulatory changes which will determine the potential of these segments in future. In the past, IRDA has largely regulated tariff rates in the non-life sector. The sector has been deregulated gradually for all policy prices except third party motor vehicles insurance. Detariffication and price deregulation, initiated in 2007, resulted in intense competition among industry players. Detariffication initially had a negative impact on the sector as it decelerated its momentum of growth but later resulted in the stabilizing of prices in many business segments. Growth in the non-life sector has been largely dominated by mandatory motor insurance. Motor insurance continues to be the largest non-life segment with a share of 45.8 % in FY12. Third party insurance, which is still regulated, continues to be the largest loss-making segment. However, if the government increases the prices for third party insurance, with better risk pricing and technology this segment will see improvement in profitability.


“Risk adequate pricing is imperative for an insurance company to take a profitable growth route and the first step towards the same is getting the pricing strategy right.” Mr. Antony Jacob, CEO, Apollo Munich Health Insurance Company Limited

Health insurance has been one of the fastest-growing segments in non-life insurance, outpacing all the other segments of the sector: its share increased from 13.2 % in FY07 to 22.3 % in FY12.

Segment-wise share of premiums underwritten by non-life insurers
120 100

Share (%)

18 44 6 11 20
2008-09 Health Fire Marine

18 43 6 12 21
2009-10 Motor

17 43 6 11 23
2010-11 Others

16 46 5 10 22

60 40 20 0

46 6 12 18

Source: IRDA Annual reports, D&B Research

In the last few years the sector has seen emergence of specialised companies such as Star Health and Apollo Munich in the health insurance space. The health segment will see the emergence of many

more specialised players and is poised for immense growth. Major growth drivers for health insurance will be increase in demand for health care and growing awareness of health insurance.


“Standalone (mono line) insurance companies are not envisaged in the near future except in the health sector. In the health sector (which is a fast growing sector) where they are envisaged, niche products to cater to different consumer sectors will emerge. In particular health insurance sector is poised for quantum growth in the coming years. Innovative products will grow in this sector” Mr. Srinivasan Kalambur, Former Whole-time member, IRDA

Health and motor insurance will continue to lead the non-life insurance industry as the share will continue to increase manifold in the future. Property insurance is at an early stage, constituting a very small part of the non-life insurance business. Considering there has been a significant rise in the percentage of home owners, home loans, and mortgaged

properties, there is a huge untapped potential for property insurance market. As mortgage penetration continues to rise and there is an increase in overall product awareness and acceptance, this segment will grow significantly on the lines of health insurance.

Private entities to play a greater role
The vast unexploited market for non-life insurance has attracted many new private entrants to the sector. New entrants have formed joint ventures with foreign insurance companies to capture a significant share of non-life business. If FDI (Foreign Direct Investment) in insurance increases to 49 %, the sector is expected to see many new foreign entrants as well as an increase in the existing stake of foreign companies to capture a slice of the non-life insurance business. Regulatory reforms, foreign collaborations, quality services, and better growth strategies will see the share of private sector companies continue to increase.

Share of public and private insurers in non-life business
120 100 80 Share (%) 60 40




















Source: IRDA Annual Reports, D&B Research


After liberalisation, the life insurance industry witnessed an unprecedented growth in premiums between FY2000–05. This was the first phase of growth to follow the regulatory reforms of 1999 and was largely characterised by high capital investment and expansion of distribution networks. The second phase of growth experienced by the industry was between FY05–09. This phase was characterised by better pricing and product innovation. In recent years, the life insurance industry has slowed down considerably. The slowdown has been largely attributed to the domestic macro-economic environment.

“One of the key reasons why the insurance industry has kind of seen a dip over the last couple of years is largely around the overall slowdown in growth and the regulatory environment that we have operated in.” Mr. Gaurav Rajput, Director Marketing & Products, Aviva Life Insurance

On the macro-economic front the economy is currently facing a high inflationary environment which erodes the intrinsic value of life insurance policies. Erosion in the value proposition of life insurance policies has resulted in decline in the demand for life insurance. Also, higher inflation results in decreased disposable income, which lowers the demand for insurance. The government has been taking measures to rein in inflation by reducing bottlenecks in supply by means such as increase in FDI limit in retail. These measures are expected to moderate inflation to an extent. In an economic environment of low inflation, people tend to realise the value of savings in life insurance policies,

especially those attached with a saving component. If the inflationary macro-economic environment moderates, it will boost growth in the life insurance industry. The life insurance industry will continue to witness regulatory changes that will move the industry towards long-term savings and protection. Some of the key regulatory changes that are currently getting finalised are regulation on product standardisation, increase in agent’s commission, options for bancassurance tie-ups, regulation on pension products, and IPO norms.

Life Insurance Penetration and Density
60 50 40 US$ 30 20 10 Growth Phase 1
20 01 20 02 20 03 20 04 20
5.0 Post Regulatory Reforms in 1999 Product Innovations 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5
10 11

Growth Phase 11



Source: IRDA Annual Report 2011, D&B Research












Low levels of rural insurance penetration, in both life insurance and pension plans, offer significant potential for life insurers to embark on the next phase of growth. For micro-insurance growth, insurers will increasingly introduce products suitable to the low-income population’s needs which can help them mobilise savings and enable wealth accumulation along with life protection. From a long term perspective, one of the key growth drivers for the life insurance industry is the favorable demographics of India. The working population along with GDP per capita is expected to increase in future which will result in higher disposable incomes. Rise in income levels generally tends to increase insurance spending, hence it will deepen insurance penetration in the country.

Life insurers have started using the Internet extensively for selling term insurance plans, as the medium gives a convenient and cost-effective alternative option for distribution. Indian consumers with higher disposable incomes and higher standards of living will require innovations in distribution and marketing to access to life insurance products. Insurers also need to gear up with advanced technological solutions and impart training to their financial advisors to meet the diverse needs of consumers. The industry is at the threshold of a new growth phase which will be characterised by innovation in distribution, marketing, and a focus on micro-insurance.

Regulatory Environment

“In the last 10 years, a lot of growth has happened in insurance industry. Like any sunshine industry, growth happens in the first few initial years and then there is a period of stabilisation and consolidation which happens. So the next few years are hopefully going to be a lot brighter than what we have seen in the last two years.” Mr. Gaurav Rajput,

Director Marketing & Products, Aviva Life Insurance segment; Health and motor insurance will lead the non-life property insurance market offers huge potential

REGULATORY ENVIRONMENT Regulatory changes will ensure risk management and improve transparency and supervision
Strength and quality of the regulatory framework will bring about sustainable development in the insurance industry. In the past few years, the insurance industry has witnessed several regulatory changes that have impacted the sector both favorably and unfavorably. Also there are some key regulatory changes that are in the process of being finalised and which can decide the future road map of the sector. In 2010, IRDA issued a circular on the disclosure of agent commission to ensure more stringent disclosure norms. As per the circular, insurers will have to disclose to policyholders the exact commission paid to insurance advisors. The regulation will make insurance products more transparent and will protect the long-term interest of customers by enabling more informed decisions. In the short term, the industry may witness reduction in the number of policies sold due to implementation of these norms. But in the long term, the industry will gain as the norms will make insurance advisors more accountable to their clients and are likely to ensure fair play and transparency in the sector.


“On the one hand transparency will enhance the image and credibility of agents. On the other hand, it may lead to greater levels of rebating (which is punishable under the law). Disclosure and good corporate governance are related. Corporate governance will enhance the care and diligence exercised by the top management and board.” Mr. Srinivasan Kalambur, Former whole-time member, IRDA

The regulator also aims at ensuring appropriate risk management by insurers since the nature of the business and the current global economic environment requires industry players to have more safeguards. Current solvency norms in India already have safeguards additional to some of the international solvency norms. For instance, IRDA has issued directions to non-life insurers to maintain a solvency ratio of at least 150 % for all lines of business. IRDA has also mandated both life and non-life insurance companies to submit their Economic Capital report annually. Economic capital assessment framework will play an important role in overall risk management for insurance companies. This framework will enable insurers to determine the right amount of capital to be allocated for each risk carried out in the insurance business. IRDA has also issued directions to all insurers to come up with a public disclosure framework. The standard on public disclosure is as per the

leading international practices followed by the IAIS. These norms require insurers to disclose company profile, financial performance, risk concentration, solvency, corporate governance elements, management of insurance companies, etc. The standard will bring more fair and transparent disclosure which in turn will strengthen the overall corporate governance of the insurance industry. IRDA has also issued disclosure norms requiring companies to publish accounts on a half-yearly basis. Disclosure norms require companies to publish accounts of the past five years on their website prior to an Initial Public Offering (IPO). The regulator is also in the midst of finalising some regulatory reforms such as IPO norms, product standardisation, reforms on pension products, etc. These regulatory changes, current as well as anticipated, are aimed at ensuring customer protection and at the same time improving disclosures, transparency, and market discipline in the sector.

“The regulator will bring regulations which will make the insurance products more customer friendly and transparent; enhancing clarity while they buy a product.” Mr. Amitabh Chaudhry, MD and CEO, HDFC Life


TECHNOLOGY Embracing new technology will enable business growth
The role of technology is ubiquitous in all stages of the insurance industry, right from product designing, product customisation, research and analytics, risk assessment, and product pricing to product distribution and marketing. Embracing new technology will be one of the crucial drivers for overall growth of the insurance industry as it can result in enhanced sales effectiveness and cost reduction, cascading to reduction of prices of insurance products. Insurance companies constantly need to understand the evolving insurance market and build in capabilities to respond to them as swiftly as possible. New technology will enable sophisticated research and analytics which in turn will provide more accurate information about the market conditions and client needs. Improved data management process will enable smooth flow of information and more sophisticated risk assessment: for example, in index based weather insurance, technology helps the insurer in making better risk assessment and loss measurement. Use of technology such as healthcare technologies and devices for remote ECG, fetal monitoring, etc. can also be used for improvising insurance products and for early detection enabling risk minimisation. Insurers are already investing a portion of the underwritten premiums in research and analytics, and the proportion will keep growing in the future. Also, since more data will be available through the use of technology, insurers will be in a better position to assess the likelihood of a risk getting materialised. This will help insurers better price their products. Technology also facilitates improvised claim management and customer service. Multiple processes and platforms with checks and balances at various levels form a complex structure in areas of claims management. Technology can be a great enabler in improving the claims management system in terms of data analysis and transactional processes leading to increased efficiency and cost reduction. A robust online claims management naturally translates into improved customer service. A well define comprehensive claims management systems increases the chances of fraud detection as well.

“Technology is going to play a far greater role in insurance companies, in the way they interact with customers, in the kind of processes and systems that they are putting in place. Far greater efficiency in customer management can only be brought about by effective use of technology.” Mr. Gaurav Rajput, Director Marketing & Products, Aviva Life Insurance


Role of Technology

• Product design • Product distribution and marketing • Enhanced sales effectiveness • Improved client servicing

Better Response Capabilities

Better Interactive Capabilities

• Dynamic market conditions and client needs • Real time information sharing

Better Risk Assessment
• Better Risk Pricing • Cost reduction

Sophisticated Research and Analytics

• Smooth flow of information • Improved data management process

Digitisation will be one of the key strategies for insurers to meet the customer’s dynamic needs and requirements. Digitisation requires healthy changes to technological and business processes. It will strengthen interactive capabilities to help insurers to better connect to their customers. Digitisation will also improve response capabilities of

insurers to swiftly adapt to changing market needs and regulations. The technology will enable real time sharing of information between insurer, customer, and claim facilitator, which in turn will facilitate a faster decision-making process.


“IT needs to play a significant role in enabling real time data sharing requirements between the claims facilitators and providers. This may be possible by creating a data highway where each customer, provider and claims facilitator can work in tandem for faster decision making through real time sharing of information.” Mr. Antony Jacob, CEO, Apollo Munich Health Insurance Company Limited

Mobility will also become one of the key tools for insurers to connect to their customers. With the advent of smart phones and other such devices, insurers have started providing mobile insurance services to provide quotes, policy information, etc. The mobile phone is one of the most personalised and convenient communication tools for interaction with customers. With customers becoming increasingly tech-savvy, mobile technology will be a useful tool for making insurance servicing very convenient. The technology will benefit customers, intermediaries,

and even surveyors. For instance, one of the private insurers has used the mobile platform to remove inefficiencies in the claim process system. So if customer’s vehicle meets with an accident, he can use his smartphone with insurer’s app to initiate the claim process by just clicking ‘Claims’ button. The app can also send pictures of the damaged car with a claim request to the insurer’s data center. The application also gives a consolidated view of all their policies, reminder services to renew policies, and a tracking system for status of claims.

“For close to 15% of our consumers, the first interaction takes place with mobile, so they are actually going on our mobile site, do the comparison, select the product that they want to buy and then come online to buy.” Mr. Akshay Mehrotra, CMO, PolicyBazaar.com”

Cloud technology will also be one of the growth enabling technologies as it can help insurers improve customer satisfaction and operational efficiency with reasonable security. The technology can enable insurers to maintain current IT infrastructure and introduce new business solutions with relatively lower investment and operational costs. Augmented reality is another technology that can be used by insurers to significantly enhance product offerings in the dynamic insurance market.

For instance, one of the private insurers ran a campaign using augmented reality to raise customer awareness of its offerings in the technology market. As the insurance industry is aiming to exploit its full potential, adopting new technologies such as Cloud technology, augmented reality, etc. will enable insurers to achieve operational efficiencies, enhance sales effectiveness, and improve client servicing.


Socio-economic changes, macro-economic variables, a tightening regulatory environment, and the helping hand of technology. The businesses that read and adapt to these trends are the ones that will rise to the surface.


Getting to the bottom of things.

Section 111:


The insurance industry is fast emerging as one of the most promising markets in the world. Total premiums underwritten by the industry for FY12 stood at Rs. 3,399.5 bn. Although insurance penetration has increased from 2.3 % in 2000 to 4.1 % in 2011, and insurance density has increased from US$ 9.9 in 2000 to US$ 59 in 2011, there is still a lot of untapped potential in insurance markets. As the GDP per capita

will increase, insurance premiums are expected to grow faster resulting in rising insurance penetration. Favorable demographics, growing middle income class, regulatory reforms, rising risk awareness, potential of health insurance, and micro-insurance are some of the growth drivers of the insurance industry.

“We believe that the Indian insurance market is still in its nascent stage and thus is far from a saturation point where we see consolidation. We have a little over 5% of the Indian population covered by some kind of health insurance schemes, which signifies that there is a lot of space for many more players to enter and operate.” Mr. Antony Jacob, CEO, Apollo Munich Health Insurance Company Limited

Liberalisation of the insurance market in 1999 laid the foundation for insurance companies to tap the potential of the market. Foreign entities entered the market through joint ventures with domestic companies despite being subject to a cap of 26 % in ownership. Public insurance companies have largely dominated the insurance market. However, the potential of the insurance market will attract many new entrants including foreign entities which may reduce the dominance of public entities in the insurance market. Further liberalisation of insurance markets will bring more products which are customised to consumer needs. The consumer’s needs and preferences will be the focus when designing new products. Insurers will use innovations in distribution and marketing channels to reach a larger section of the population. Traditional insurance advisors have dominated and will continue to dominate as a major distribution channel in insurance market. However, insurers will diversify into a multi distribution model to serve the diverse needs of customers. Product pricing will be based more on the product and customer-specific risk. There is a huge under-served insurance market which needs to be tapped through customisation and innovation.

Technology will play an important role in the distribution and marketing channels. Effective use of technology can result in improvement in sales effectiveness and reduction in the cost of delivering insurance products which can make some of the low-margin products viable for future success. Technology is also very significant in designing new as well as existing products as per the customer’s needs as customer-centricity will be the focus in the future. Better risk assessment and full realisation of customer profile will also require the use of technology which can bring sophistication in research and analytics and in data management of insurance companies. The life insurance industry, after registering strong growth post-liberalisation, is going through a slowdown phase. Life insurers will fine-tune their business tactics as per the new regulatory requirements. The industry will see stabilisation in growth and profitability in the short term. In the long term the industry offers huge potential to grow manifold. The life insurance industry plays an important role for the government in mobilising household savings into productive use such as long term infrastructure projects.


Detariffication in non-life industry resulted in better risk management and improved underwriting skills. In the long term, detariffication will provide a strong base for the industry to grow. Mandatory motor insurance has been a major contributor while the health segment is the fastest growing segment in the industry. Health and motor insurance will lead the growth of non-life insurance industry. The non-life industry needs to manage the country’s high exposure to natural calamities. Property insurance has enormous potential to grow in the future ahead. Lastly, the under-served rural market will be one of the most significant growth drivers for the industry. Insurers need to have long term commitment for micro-insurance to fully realize the potential of this market. Since micro-insurance products generally offer low margins, insurers will have to rely on existing distribution channels such as microfinance institutions or NGOs to reduce the cost of delivering insurance products. Life and non-life insurers and pensions need to customise their offerings and choose appropriate distribution channels

to cater to the specific needs of low-income people with issues such as irregular incomes or the need for simple products. Micro-insurance will play an important role in deepening insurance penetration and making financial inclusion possible for the insurance industry as well. The insurance industry still faces a lot of challenges which can prove to be hurdles in realising the full potential of the market. Some of these challenges are in the areas of investment regulations, risk-based pricing, product standardisation, and solvency norms. The government has taken a series of regulatory actions to further liberalise insurance market and remove some of these hurdles. Reforms, on the one hand, will bring more flexibility in terms of pricing and products which can fuel the growth, and on the other, will improve transparency, solvency, and corporate governance in the sector. Reforms coupled with innovations and technological developments are expected to play a key role in shaping the future of the insurance industry.


References & Sources
• • • • • • • IRDA Annual reports IRDA report on Bancassurance Report on Impact Evaluation of Pilot Weather Based Corp Insurance Study (WBCIS) World Bank report on Weather Based Crop Insurance in India NCAER report on Insurance Awareness Campaign World Insurance in 2011 by Swiss Re Insurance in emerging markets: growth drivers and profitability by Swiss Re

Websites: www.irda.gov.in www.irdaindia.org www.gicouncil.in www.lifeinscouncil.org


We would like thank the following experts for sharing their insights during the preparation of this report:

Mr. Antony Jacob,
Chief Executive Officer, Apollo Munich Health Insurance Company Limited
Antony Jacob is the Chief Executive Officer and Whole Time Director of Apollo Munich Health Insurance Company. Before joining Apollo Munich, Antony was the Regional Finance Director, Asia & Middle East, based in Dubai, for the RSA Group. Between 2004 and 2007, he served as Managing Director of Royal Sundaram Alliance General Insurance in Chennai. A thought leader in the insurance industry, Antony uses over 26 years of professional experience to lead Apollo Munich, while also being a strong voice for the development of the insurance industry in India.

Mr. Gaurav Rajput,
Director Marketing & Products, Aviva Life Insurance

Mr. Gaurav Rajput is part of the leadership team at Aviva India and is responsible for the overall Product, Online & Marketing strategy at Aviva. His role encompasses brand marketing, communications, research, channel marketing, analytics, cross sell and product development. He is also responsible for driving one of the key emerging distribution channels – the online channel. He brings with him over 15 years of rich experience in building brands across categories in both national and international markets.

Dr. Amarnath Ananthanarayanan,
Chief Executive Officer and Managing Director, Bharti Axa General Insurance

Dr. Amarnath Ananthanarayanan (Amar) is the Chief Executive Officer and Managing Director of Bharti AXA General Insurance. In his present role, Amar is responsible for spearheading the company towards its goal of becoming the preferred organisation for General Insurance in India. Amar brings with him over a decade of experience and in-depth understanding and knowledge in retail insurance & consumer finance, varied functional proficiencies and cross country exposure.


Mr. Srinivasan Kalambur,
Former non-life member, IRDA

Mr. Kalambur K Srinivasan is a graduate in commerce [B.Com (Hons)] of Delhi University and a post graduate in management (M.B.A.) of Bangalore University. He is also a Fellow of the Insurance Institute of India and holds other qualifications/ accreditations from institutions in India and abroad. After nearly four decades of operational experience as an executive in the insurance industry in India and abroad, he served the Insurance Regulatory and Development Authority (IRDA), India from 2005-2010 as whole-time member (of Board) responsible for IRDA’s verticals in non-life insurance & reinsurance, health and intermediaries.

Mr. Amitabh Chaudhry,
Managing Director and Chief Executive Officer, HDFC Life

Mr. Amitabh Chaudhry is the Managing Director and Chief Executive Officer of HDFC Life. Before joining HDFC Life in January 2010, he was the Managing Director and CEO of Infosys BPO and was also heading an Independent Validation Services unit in Infosys Technologies. Mr. Chaudhry started his career with Bank of America delivering diverse roles. Mr. Chaudhry completed his Engineering in 1985 from Birla Institute of Technology and Science, Pilani and MBA in 1987 from IIM, Ahmedabad.

Mr. Akshay Mehrotra,
CMO PolicyBazaar.com

Mr. Akshay is the Chief Marketing Officer for PolicyBazaar.com. He leads the company's marketing activities including strategic brand building and the company's media and PR activities. Akshay previously was the Group Head of Marketing and Corporate Communication for Bajaj Allianz and looked after brand building activities for both Life Insurance and General Insurance brands in the country. Under his leadership, the company entered amongst the Top 50 Service Brands in India. Akshay is an MBA in Marketing from Symbiosis, Pune.


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