PwC’s Insurance Insights

Analysis of regulatory changes and impact

assessment for March 2018

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PwC’s Insurance Insights
Our point of view on recent trends in insurance
Preface
During the month of February 2018,
the insurance sector witnessed an
increase in the amount of premiums
collected. Specifically within the life
insurance sector, the Life Insurance
Corporation of India (LIC) continues
to dominate the market share. A
brief outlook at the general and
life insurance sectors, in terms of
premium collection, market share,
number of policies issued and lives
covered, has been presented below.
• Within the general insurance sector,
• The figures clearly depict the
dominance of the public sector in
terms of premium collection and
market share in both life and
general insurance.
• In the case of life insurance, the
market share of LIC has increased
by almost 70%,1 cementing the
1
IRDAI
2 PwC
Other key guidelines issued by the Authority during the month of March 2018 Contacts
company as the leading life
insurance provider in the country.
In terms of insurance policies issued
upto February 2018, LIC issued
a significant amount of policies,
totalling to more than double those
of private life insurers. However, at
the same time, private life insurers
have held a significant market share
in terms of the number of lives
covered under group schemes.
there has been growth in revenues
earned by companies. Private
and public sector general insurers
both continue to enjoy a large
market share in the general
insurance sector.
PwC’s Insurance Insights
PwC’s Insurance Insights

Our point of view on recent trends in insurance Other key guidelines issued by the Authority during the month of March 2018 Contacts

Preface

General insurance sector Life insurance sector

New business premium (in crore INR) Premium in crore INR

140000.00
Premium in crore INR

140000.00
120000.00 120000.00
100000.00 100000.00
80000.00
80000.00
60000.00
60000.00
40000.00
40000.00
20000.00
20000.00
0.00
0.00
Private and public sector Stand-alone private Specialised PSU
For February For February Up to 28 Up to 28
general insurers health insurers insurers
2017 2018 February 2017 February 2018
General insurers 3944.09 5248.24 41250.19 48891.40
Private life insurers
For February 2017 For February 2018 LIC 6847.59 8476.73 99096.57 115803.52

Up to 28 February 2017 Up to 28 February 2018 Private life insurers LIC

Market share up to February 2018 Market share up to February 2018

5% 6%
Private and public sector general insurers 30%

Stand-alone private health insurers Private life insurers

Specialised PSU insurers LIC

70%
89%

Source: IRDAI Source: IRDAI

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Our point of view on recent trends in insurance Other key guidelines issued by the Authority during the month of March 2018 Contacts

Preface

Number of policies/schemes Number of lives covered under group schemes

18000000.00
16000000.00
120000000.00
14000000.00
12000000.00 100000000.00
10000000.00 80000000.00
8000000.00 60000000.00
6000000.00
40000000.00
4000000.00
2000000.00 20000000.00
0.00 0.00
For February For February Up to 28 Up to 28 For February For February Up to 28 Up to 28
2017 2018 February 2017 February 2018 2017 2018 February 2017 February 2018

Private life insurers 577011.00 593619.00 5191670.00 5753415.00 Private life insurers 7575619.00 12295768.00 110722234.00 106343590.00
LIC 1761155.00 1851386.00 15344205.00 16725281.00 LIC 2478179.00 8251467.00 43305652.00 46893195.00

Private life insurers LIC Private life insurers LIC

Source: IRDAI Source: IRDAI

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PwC’s Insurance Insights
Preface
Our point of view on recent trends in insurance
In this edition, we wish to focus upon
the significance of motor insurance.
In India, it is mandatory to avail third
party motor insurance. Surprisingly,
motor insurance is one of the largest
portfolios for general insurers and
it has contributed nearly 39% to the
gross direct premium written by
general insurers in 2016–17.
The segment assumes significance
also because of third party insurance,
which is mandated by law. Due to its
controlled pricing mechanism and
high-loss ratios, third party motor
insurance has been subject to close
regulatory supervision and has
experienced many ups and downs.
Another analysis conducted by
the Insurance and Regulatory
Development Authority of India
(IRDAI [the Authority]) shows that
2
IRDAI Journal. (September 2017). Motor insurance in India.
Retrieved from https://www.irdai.gov.in/ADMINCMS/cms/Uploadedfiles/IRDAI%20Journal%20September%202017.pdf
5 PwC
Other key guidelines issued by the Authority during the month of March 2018
more than 25% of motor insurance
policies written in 2015–16 were that
of new vehicles and more than 70%
of policies were associated with less
than 6 year old vehicles. This is an
indication of the number of uninsured
vehicles on the roads.2
While there are several initiatives
that are being undertaken by the
Government of India through its
legislative and executive powers and
the Authority through its regulatory
framework, statistics indicate that
much more needs to be done. Further,
several initiatives have been taken by
the Authority to promote motor third
party liability insurance awareness,
for which the Authority personally
publishes the premium rates each
year, which every insurer needs to
comply with and set their premium
Contacts
masters accordingly. In order to
simplify and promote ease of selling
motor insurance policies:
• The Authority has recently issued
Guidelines on Motor Service
Providers regularising the role
played by automobile dealers
in selling and servicing motor
insurance policies.
• The Authority has also recently
issued an Exposure Draft on
Telematics, which has the potential
to revolutionise the pricing
mechanism of motor insurance by
the use of technology in assessing
the risks posed by a particular driver
or a particular vehicle.
• The Authority has also permitted
the sale of simple motor insurance
policies through point of
sale persons.
PwC’s Insurance Insights
PwC’s Insurance Insights
Preface Our point of view on recent trends in insurance
Directions of High Court of Delhi at New Delhi on Exclusions related to Genetic Disorders3
Ref: IRDAI/HLT/REG/CIR/046/03/2018
Introduction
The Authority recently directed all
insurance companies to re-look at
their exclusionary clauses in insurance
contracts and ensure that they do not
reject claims on the basis of exclusions
relating to genetic disorders.
The basis for this direction was the
recent judgment in the case of M/s
United India Insurance Company
Limited vs Jai Parkash Tayal, wherein
the Hon’ble High Court of Delhi held
that the exclusionary clause of genetic
disorders in insurance policies is too
broad, ambiguous and discriminatory
and thus violates Article 14 of the
Constitution of India.
3
https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo3426&flag=1
6 PwC
Contacts
Other key guidelines issued by the Authority during the month of March 2018
Date of issue: 19 March 2018 Applicability: To all Life, General and Health Insurers
Implications for insurers genetic disorder will get insured.
At the time of underwriting policies,
• No claim in respect of any existing
insurance companies are free
health insurance policy shall be
to refuse health insurance to
rejected based on exclusions related
customers they see as unfit.
to genetic disorders.
However, once insured, the insurer
• Insurers are not allowed to include can’t deny a claim on the grounds of
genetic disorders as one of the a genetic disorder.
exclusions in the new health
insurance policies issued in respect
of all their existing health insurance
products and also in the new
products launched and/or filed
under the provisions of Guidelines
on product Filing in Health
Insurance Business dated
29 July 2016.
• The notification, however, does not
indicate that a person with a known
PwC’s Insurance Insights
PwC’s Insurance Insights
Preface Our point of view on recent trends in insurance
The Prevention of Money-laundering (Maintenance of Records) Second and Seventh Amendment
Rules 20174
Ref: IRDA/SDD/CIR/MISC/047/03/2018
Introduction
On 1 June 2017, the Government of
India issued a notification stating that
Aadhaar and PAN/Form 60 would
be made mandatory for availing any
financial services, including insurance.
Further, it was clarified in circular
IRDAI/SDD/MISC/CIR/248/11/2017
that an Aadhaar number would
be required to be linked to an
insurance policy.
In light of the recent petition of the
Hon’ble Supreme Court of India dated
13 March 2018, the deadline for
linking Aadhaar has been extended
till the matter has been heard and the
judgement has been declared.
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https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo3427&flag=1
7 PwC
Contacts
Other key guidelines issued by the Authority during the month of March 2018
Applicability: To all life and general insurers
Date of issue: 20 March 2018
(Including Standalone Health Insurers)
Implications for insurers
• In case of existing insurance policies,
the date for linking Aadhaar has
been extended till the verdict is
announced by the Hon’ble Supreme
Court of India.
• In case of new insurance policies,
insurers should collect Aadhaar
details and PAN/Form 60 from
their clients within six months from
the starting date of the account-
based relationship. In cases where
clients do not have their Aadhaar
details, they can provide any official
valid document, as mentioned
under the Prevention of Money
-Laundering (Maintenance of
Records) Rules, 2005.
PwC’s Insurance Insights
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Preface Our point of view on recent trends in insurance Contacts

Other key guidelines issued by the Authority during the month of March 2018

Premium Rates for Motor TP Liability Insurance Cover for FY 2018-195

Ref: IRDA/NL/NFTN/MOTP/053/03/2018 Date of issue: 28 March 2018

Introduction Implications for insurers

The Authority had released an
exposure draft on 7 March 2018 on
the revision of premium rates for
motor third party insurance covers,
inviting comments from all concerned
stakeholders. Pursuant to comments
received from the stakeholders and
examination by the Authority, the
Authority has notified premium rates
applicable to motor third party liability
insurance covers for the year 2018–19.
The detailed rates of premium based
on the category of the vehicle are
mentioned in the circular issued.
• Insurers, on an immediate basis, will
have to configure their systems and
amend their premium masters and
underwriting policies in compliance
with the said guidelines.
• Insurers are not allowed to cancel
current insurance policies and
undertake new policies to avail the
new premium rates.
• This notification as well as the
schedule of premium rates shall be
prominently displayed on the notice
board of every underwriting office
and on insurers’ websites where it
can be viewed by the public.

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PwC’s Insurance Insights

Preface Our point of view on recent trends in insurance Contacts

Other key guidelines issued by the Authority during the month of March 2018

Exemption of reinsurance schemes, in respect of specified insurance schemes, from the purview of GST6

Ref: IRDA/F&A/CIR/MISC/052/03/2018 Date of issue: 28 March 2018 Applicability: All insurers

Introduction schemes. The captioned order stated that if the benefit of reduction in
above contains a total of 24 such premium is not passed down to the
Based on the meeting held by the
schemes which are exempt from GST, beneficiary/government, suitable
Goods and Services Tax (GST) Council
stated as part of the annexure to the action can be taken against the
on 18 January 2018, it was decided
order. These schemes, inter-alia, insurance company, as per section 171
to exempt reinsurance schemes,
include the Pradhan Mantri Jeevan of the Central Goods and Services Tax
in respect of specified insurance
Jyoti Bima Yojana (PMJJBY) and (CGST) Act, 2017.
schemes, from the purview of the tax
Pradhan Mantri Fasal Bima Yojana
network vide D.O. No. 354/12/2018-
(PMFBY), among others.
TRU dated 24 January 2018 from
the finance secretary. Given the fact Implications for insurers
that no GST is payable on insurance
This exemption is on the basis that any
premium in such schemes but that
benefit derived by insurers on account
GST was applied on reinsurance for
of reduction in premium should be
such schemes led the GST Council
passed on to the beneficiary and also
to accept the proposal to exempt
state and central exchequers.
reinsurance for specific insurance
Thus, insurers should keep in mind

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Preface Our point of view on recent trends in insurance Other key guidelines issued by the Authority during the month of March 2018

Contacts

Vivek Iyer Joydeep K Roy Dnyanesh Pandit Saigeeta Bhargava

Partner Partner Director Associate Director
vivek.iyer@pwc.com joydeep.k.roy@pwc.com dnyanesh.pandit@pwc.com saigeeta.bhargava@pwc.com
Mobile: +91 9167745318 Mobile: +91 9821611173 Mobile: +91 9819446928 Mobile: +91-9560518833

Yugal Mehta Varsha Mehrotra Prateek Kannan

Manager Consultant Consultant
yugal.mehta@pwc.com varsha.mehrotra@pwc.com prateek.kannan@pwc.com
Mobile: +91 9970163293 Mobile: +91 83890640211 Mobile: +91 9840753109

10 PwC PwC’s Insurance Insights

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