An overview on Indian insurance sector & ICICI...
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An overview on Indian insurance sector & ICICI Lombard Lloyd’s Market Development Team February 6, 2012
Transcript of An overview on Indian insurance sector & ICICI...
An overview on Indian insurance sector & ICICI Lombard Lloyd’s Market Development Team
February 6, 2012
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Initial years of liberalizationYr 2001 Yr 2010 Yr 2012
Standard products : Fire, Marine, MotorProduct
67% under ambit of tariff Concept of cross-subsidy
Pricing
Majority sourcing trough 4,000 govt. owned company offices Agency was the only optional distribution channel
Channels
Ageing work-force Varying degrees of technical expertise
People
Lack of service innovation Cashless claim settlement unheard
Service
Conventional processes entailing intensive paper work(at policy issuance and most importantly even claims )
Process
No of players: 4 ; Premium : USD 2.14 bn (CAGR: 14%); GDP pen’n: 0.5 %
Industry characterized by moderate growth and oligopoly driven market environment
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Post de-regulationYr 2001 Yr 2010 Yr 2012
Motor, Fire continue to be dominant categories Traction building up on health as a segment
Product
Post de-tariff phase blues, led to initial slowdown on growth Discount up to 80% on fire, 40% on motor segments
Pricing
75% of business intermediated through agents, brokers Bancassurance build up commenced
Channels
Private sector teams comprising of diverse industrial backgroundsPeople
Service innovation Pro-active and transparent approach
Service
Conventional processes continuesProcess
No of players: 22; Premium : USD 7.4 bn (CAGR: 15%); GDP pen’n: 0.6%
Penetration continued to be a challenge…
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0.3
60
2.1
150
Mumbai Floods Hurricane Katrina
Insurance LossEconomic Loss
Lower penetration compared to international benchmarks
Lowest amongst the four BRIC nations
Source: Swiss Re, Sigma, Data of 2009
Instances of large catastrophesContribution by insurance sector to
the economic losses in India have been lower than other countries
In USD bn
40%15%
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Current overview
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Overall: on the growth trajectory
Outshone many economies and grew even during financial crisis
Source :Swiss Re,Sigma no 5/2006, 2/2010; Global Insurance Review, 2010 & outlook 2011/12; IRDA, India; World Bank.
Opportunity has helped maintain 2x growth of GDP
Price deregulation
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Product & Channel mix Motor insurance continues to be the
largest portfolio However, Health segment has
demonstrated the fastest growth in the recent years
In terms of distribution channels: Individual agents contribute a very large
portion Direct channels like online, call-center
getting popular
Business Lines: FY2011
Distribution Channels
Source: GI Council, FY 2011, Unaudited segment-wise business; Public disclosure by various companies
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Insurance market opportunity in IndiaFavoring demograph-ics
• Over 1.2 billion people, one of the largest market• 2/3rd of population < 35 yrs
• Largest segment in 15-50 age group presents a favorable “youth bulge”
• Over 1.2 billion people, one of the largest market• 2/3rd of population < 35 yrs
• Largest segment in 15-50 age group presents a favorable “youth bulge”
Fast growing economy
Lower insurance penetration
• Large investments in industrial and infrastructure projects
• USD 1000 bn in next 3 years and global aspirations of corporate India
• Increasing consumer spending, Increasing income levels
• Large investments in industrial and infrastructure projects
• USD 1000 bn in next 3 years and global aspirations of corporate India
• Increasing consumer spending, Increasing income levels
• Very low insurance penetration at 0.6% of the GDP• Large growth opportunity
• Government support to push insurance penetration in form of social schemes; tax breaks and subsidies
• Very low insurance penetration at 0.6% of the GDP• Large growth opportunity
• Government support to push insurance penetration in form of social schemes; tax breaks and subsidies
Regulatory interventions acting as further catalyst to growthRegulatory interventions acting as further catalyst to growth
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Exploring the opportunities
Under penetration across all
lines of personal products
Less than 10%
penetration in health
20% cars uninsured
Less than 5% homes
insured
80% Two wheelers uninsured
RetailCost effective distribution for low ticket insurance products will be key to increasing penetration
Profit & Quality
Customer loyalty
Risk based pricing
Diversified channels
Diversified products
WholesaleProfit and quality are key tenets for a sustained growth
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Company overview
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ICICI LombardJV between ICICI Bank and Fairfax
2nd largest bank in India
Asset base of USD 90 billion Profits of USD 1115 million
(FY2011) Business sourcing locations
Branches: 2010, ATMs: 5300
International presence – 18 countries Subsidiaries - UK, Russia , Canada Branches – US, Singapore, Bahrain, Hong
Kong, Srilanka, Qatar, Dubai & DIFC Rep office – UAE, China, Sri Lanka, South
Africa, Bangladesh, Thailand, Malaysia, Indonesia
Leading financial conglomerate based in Canada
Asset base of USD 31 billion Profits of USD 469 million Presence in 11 countries
North bridge Financial – Canada Crum & Fosters – USA First capital – Singapore Falcon insurance – Hong Kong, Thailand Fairfax – Brazil Stakes in All trust Insurance – China, Gulf
Insurance Company, Alliance Insurance, UAE; Polish re – Poland, New line syndicate in UK & Singapore
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ICICI Group
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ICICI LombardOur successes Largest private insurance company in India Gross Premium of 966 mn USD in FY 2011
10% overall market share ; 24% of the private sector Credentials
Voice of Customer Choice Award 2011 (Frost and Sullivan) - Best Vehicle Insurer
Golden Peacock Award, 2011 for innovation for our contribution to mass health insurance programs
No. 1 Auto insurance company on customer satisfaction index: JD Power, Asia Pacific
Asia’s No 1 Insurer on Innovation : Asia Ins Review Most customer responsive insurance brand: ET- Avaya ISO 9001 certification for Operation’s, Motor Claims iAAA rating for highest claims paying ability: ICRA
14Source IRDAFY : April to March
In USD million FY2008 FY2009 FY2010 FY2011GWP GWP GWP GWP Mkt Share % Growth
ICICI Lombard 760 777 749 966 10.0% 29%Bajaj Allianz 546 600 572 660 6.8% 15%Reliance 442 435 450 376 3.9% -16%IFFCO Tokio 281 345 373 413 4.3% 11%Tata AIG 185 201 203 276 2.9% 36%Royal Sundaram 158 183 206 260 2.7% 26%Cholamandalam 128 156 178 220 2.3% 24%HDFC Ergo 49 77 211 296 3.1% 40%New Private 3 83 292 525 5.4% 80%Private Sector total 2,552 2,857 3,234 3,992 41.3% 23%New India 1,201 1,254 1,367 1,606 16.6% 17%United 850 972 1,176 1,449 15.0% 23%Oriental 876 900 1,073 1236 12.8% 15%National 916 972 1,050 1390 14.4% 32%Public Sector total 3,843 4,098 4,666 5,681 58.7% 22%Total 6,395 6,955 7,900 9,674 22%
ICICI LombardNo.1 amongst non-govt insurance cos.
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ICICI LombardBusiness mix
Impact of Price de-regulation on Property premiumsHealth and Motor insurance have been the key growth driver for the Company
Product GWP(USD mn) 2007 2008 2009 2010 2011
Fire & Eng 130 145 112 96 98Health & PA 175 210 247 225 326Motor 255 290 296 313 352Other 110 115 122 114 189Total 670 760 777 749 966
19% 19% 14% 13% 10% 13%
26% 28% 32% 30% 34%36%
38% 38% 38% 42% 36%36%
16% 15% 16% 15% 20% 15%
2007 2008 2009 2010 2011 Q1-2012
Fire & Eng Health & PA Motor Other
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76.9%
18.2%
4.8%
PSUs, 77.8%
Pvt Others, 17.6%
IL, 4.5%
59.1%
31.5%
9.5%
PSUs58.7%
Pvt Others 31.2%
IL10.1%
Industry profitability
Inner circle: FY 2010Outer circle: FY 2011
GWPFY 2010: ` 349.84 billionFY 2011: ` 425.67 billion
U/w Losses (2011 pool LR 153%)FY 2010: ` (59.25) billionFY 2011: ` (104.72) billion
U/w Losses (2011 pool LR 127%)FY 2010: ` (59.25) billionFY 2011: ` (72.59) billion
76.9%
18.2%
4.8%
PSUs, 85.9%
Pvt Others, 12.2%
IL, 1.9%
* Premium and losses do not include mono-line companies
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ICICI LombardLeadership in India
Distribution Customer Service
Risk management Technology
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CorporateCorporate
GovernmentGovernment Weather, Health -USD 125 millionWeather, Health -USD 125 million
Manufacturers DealersManufacturers Dealers
6 mfrs, 2300 dealers200 million USD6 mfrs, 2300 dealers200 million USD
Banks/ FIsBanks/ FIs 38 banks/FI USD 90 million 38 banks/FI USD 90 million
WebsiteCall centerWebsiteCall center
13 partners USD 40 million13 partners USD 40 million
Agents, BrokersAgents, Brokers16000 + agent/brokerAll lines - 235 million USD16000 + agent/brokerAll lines - 235 million USD
Corporate – USD 200 millionCorporate – USD 200 million
Specialize in multi-channel distribution N
o. 1
in th
ese
chan
nels
Distribution Customer Service
Risk management Technology
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• Health: In-house service for 95% of the portfolio Servicing 500 claims/day; Network of 4,065 hospitals
Motor: In-house surveyors; ISO:9001 certified unit
Periodic research to measure “Voice of customer dashboard” measuring service, transaction experience, Net Promoter Score
Work with the global best for corporate offerings Cunningham Lindsey- property losses United Health Care & International SOS - Overseas
travel claims W.K.Webster’s –Marine losses
Focus on Quality service
Distribution Customer Service
Risk management Technology
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Merged underwriting & claims set-up Strong actuarial team (trained from best of universities)
Prudent underwriting with strong focus on value at risk and moral hazard Risk based approach to business development
Spread of risk across panel of quality re-insurers Conservative level of catastrophic protection
Risk management
Strong controls including risk containment unit (RCU) Fraud control critical given the large volumes of
policies/claims
Distribution Customer Service
Risk management Technology
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Pioneered internet sales in India for insurance Rural POS machines for delivery of inclusive
insurance solutions (Weather; Health for BPL segments)
POS machines at grocery stores/gas stations for 2w insurance
Series of home-grown applications for productivity, service, delivery improvements
NASSCOM Award for the best technology in insurance company
Pioneered internet sales in India for insurance Rural POS machines for delivery of inclusive
insurance solutions (Weather; Health for BPL segments)
POS machines at grocery stores/gas stations for 2w insurance
Series of home-grown applications for productivity, service, delivery improvements
NASSCOM Award for the best technology in insurance company
360º use of Technology
Distribution Customer Service
Risk management Technology
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RSBY: OverviewHospitalization expenses of `30,000 ($ 600) per family
Up to five members on a floater basis 727 pre-defined surgical packages including
Maternity, Newborn Care & Day Care All Pre-existing Diseases covered from day 1
Premium of `30 (60c) per family per year Balance premium : Government funded ($15)
Both Public and Private hospitals are empanelledOn the spot delivery of Smart Card
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RSBY: Unique features Biometric smart card is issued to each
beneficiary family using the portable infrastructure
Photograph of the head of the family Fingerprints of all family members
Each empanelled hospitals have the card reader installed and are connected to the server at district level System driven approvals for inpatient treatment of the
beneficiary Allows regular data flow on service utilization Biometric enabled smart card ensures that only the real
beneficiary can use it
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Health – Bottom of pyramid (RSBY) Hospitalization expenses of Rs 30,000 per family
Up to five members on a floater basis 727 pre-defined surgical packages including
Maternity, Newborn Care & Day Care All Pre-existing Diseases covered from day 1
Premium of Rs 30 per family per year Balance premium : Government funded Cost of Smart Card borne by the Central
Government Both Public and Private hospitals are
empanelled On the spot delivery of Smart Card
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Reinsurance perspective
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Reinsurance: current scenario Limited participation in the treaties
Across the board (bouquet) approach key reason Proportional programs do not have event limits
In case of change in structure (prop to non prop) first opportunity to longstanding partners Support on CAT, Aviation, Energy and Liability
prog. Current engagement primarily on Fac basis
Terrorism, Marine DSU, Aviation ,Liability and Energy
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Future opportunities Increased participation on specialty lines
Weather, Aviation , Liability and Energy Health a growing segment - New product ideas
Social schemes Retail opportunities
Large size of CAT program opens new opportunity
Innovative Catastrophe cover to Govt
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Advantages and challengesLloyds & India Advantages
Financial security Ability to provide innovative solutions
Hindrances Lack of local presence
Understanding of business dynamics and requirement
Holistic requirements from Indian market perspective
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Thank you
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India is an important and growing reinsurance market for Lloyd's, even though foreign reinsurers can currently only write Indian reinsurance business on a cross-border basis. In just the three year period from 2007 to 2010, Lloyd's gross written premiums in India grew by almost 150%, from $73 million $182 million.
The top classes Lloyd's writes in India are offshore energy, property catastrophe, terrorism, cargo and aviation xl risks. As the economy expands, the opportunities and appetite for new specialist areas have been growing.
Over the last few years, the Lloyd's market has been working with the Indian insurance regulator, the IRDA, to find ways for Lloyd's unique structure to be accounted for in anticipation of changes that could allow more foreign involvement in the Indian market.
Lloyd's has lobbied extensively with the international (re)insurance community for a bill to allow entry of foreign reinsurers in India via branches, but those proposals have yet to be passed.
