PwC s Insurance Insights Analysis of regulatory changes and impact assessment for April 2018
Preface For, agents have traditionally been the main method of selling policies. However, recently, a dip has been observed in the number of agents in the private life insurance sector. This is primarily due to agents not being able to meet their sales targets and hence losing their jobs. However, contrary to this trend, the Life Insurance Corporation of India (LIC) has continued to introduce more agents into the system. This demonstrates LIC s dominance in the life insurance sector in India. Individual agents of life insurers 1400000.00 1200000.00 1000000.00 800000.00 600000.00 400000.00 200000.00 0.00 Private life insurers LIC No. of agents as of 01 April 2017 Net no. of agents as on 31 March 2018 Source: Life Insurance Council 2 PwC PwC s Insurance Insights
Preface In March 2018, continued to witness a significant increase in the amount of premiums collected. LIC continues to dominate the life insurance market. A brief overview of the general and life insurance sectors, in terms of premium collection, market share, number of policies issued and lives covered, as well as the number of agents in the life insurance sector, is presented below. 1. The figures clearly depict the dominance of the public sector in terms of premium collection and market share in both life and general insurance. 2. Within the life insurance market, although LIC s market share is still very high, there has been a slight dip from 70% to 69%. 3. Within the general insurance sector, there has been growth in the revenues earned by companies. Private and public sector general insurers both continue to enjoy a large market share in the general insurance sector. 4. There has been a significant reduction in the number of life insurance agents in the private sector. In contrast, there has been a significant rise in life insurance agents in LIC. Life insurance sector Premium in crore INR 160000.00 140000.00 120000.00 100000.00 80000.00 60000.00 40000.00 20000.00 0.00 For March 2017 For March 2018 Up to 31 March 2017 Up to 31 March 2018 Private life insurers 9376.04 10423.15 50626.23 59314.55 LIC 25299.69 18748.16 124396.27 134551.68 Market share up to March 2018 Private life insurers LIC 31% Private life insurers LIC 69% Source: IRDAI 3 PwC PwC s Insurance Insights
Preface General insurance sector New business premium (in crore INR) 160000.00 Premium in crore INR 140000.00 120000.00 100000.00 80000.00 60000.00 40000.00 20000.00 0.00 Private and public sector general insurers Stand-alone private health insurers Specialised PSU insurers General insurers For March 2017 For March 2018 Up to 31 March 2017 Up to 31 March 2018 Market share up to March 2018 6% 6% Private and public sector general insurers Stand-alone private health insurers Specialised PSU insurers 88% Source: IRDAI 4 PwC PwC s Insurance Insights
Digital insurance (DI) an overview In this edition, we wish to emphasise the role of digitalisation in the insurance industry and the impact that it has had on insurers specifically and on the insurance sector as a whole. Insurance companies have started using digital technology to further improve customer experiences. Various tools such as customer self-service capabilities and digital portals have been recently introduced and implemented by insurance companies to not only help reduce their costs but, more importantly, to help improve the way business is conducted. For a long time, the traditional insurance business model proved to be remarkably resilient. But it is now beginning to feel the impact of digital. Digital technology is changing how products and services are delivered, and increasingly, it will change the nature of insurance products and services and the business model itself. The importance of digitalisation is only recognised when a solid platform is built. This base helps companies to meet not only the current expectations of customers but also their future needs through data analytics and market research. Through such a platform, companies can support their business models and technology needs over and above the standard core issues such as billing, policy issuance and claims. While it is important to have a strong digital base, if companies cannot understand and identify the needs of their customers, it becomes increasingly difficult to generate a return on their investment. It is imperative for companies to understand customer needs to improve customer value. Digital platforms assist with this process. The real value in the process is realised when these digital processes are incorporated from the beginning, helping to create a framework to effectively measure the impact and viability of each scheme and product. 5 PwC PwC s Insurance Insights
Indian regulation on DI The rise and impact of DI have been seen worldwide. Recognising the need for DI in the Indian insurance sector, IRDAI, in a notification dated 13 April 2017, laid down rules for insurance web aggregators titled IRDAI (Insurance Web Aggregators) Regulations, 2017, which superseded the IRDAI (Web Aggregators) Regulations, 2013. These regulations came into force with the twin objectives of supervising and monitoring web aggregators as intermediaries, responsible for maintaining websites that allow insurance prospects to compare the price and features of products offered by different insurers and other related matters. Over the last two years, there has been a drastic increase in the amount of new business premiums collected. For FY 2015 16, the total amount of premium collected through web aggregators was 0.03 crore INR. However, by the end of FY 2016 17, the total premium collected through this medium rose to over 46 crore INR. Channel-wise new business amount of premium collected by web aggregators (in crore INR) 50.00 45.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 2015-16, 0.03 2016-17, 46.36 2015-16 2016-17 Source: IRDA: Handbook on Indian Insurance Statistics 2016-17 One of the key factors highlighting the importance and applicability of web aggregators is that they are now permitted to sell low-cost unit-linked insurance plans (ULIPs) with premiums of up to 1.5 lakh INR. 2015-16 2016-17 Applicability of DI The general insurance sector has seen a major increase in the amount of digital interactions with the customer. In the case of health and motor insurance, customers have been widely encouraged to use their mobile devices to pay premiums and file for any claims. This has allowed insurance companies to process these claims more quickly, leading to better customer satisfaction and increased efficiency. Travel insurance has seen an increase in the usage of blockchain, which has helped tremendously in initiating and closing customer claims and reducing the time from days to minutes. These technology-driven changes have helped in providing greater convenience to insurance customers specifically in India. Implications of DI Having a strong framework in place helps companies to continue to focus on achieving their business strategies and, at the same time, to continue to invest in more data-driven exercises to further improve customer value. Also, the framework will help to continue building the back-end processes that will in turn help support platform stability. Way forward in DI The advent of technology has already led to the digitalisation of insurance companies. Most of the processes that are in place have already improved due to the adoption of digital technology. Along with this, leaders in the market are continually striving to improve and bring in new technologies that can help create and search for new opportunities. However, the Indian market is still lagging behind in terms of average investment in digital technologies as compared to the rest of the world. With the rise of smartphone usage in India and greater Internet penetration, there lies a huge opportunity for greater investment in the field. 6 PwC PwC s Insurance Insights
Compliance on Order of Preference 1 Ref: IRDAI/RI/CIR/061/04/2018 1 Date of issue: 11 April 2018 Applicability: To all CEOs/CMDs of all insurance companies/ reinsurance companies/ FRBs Introduction Regulation 5 of IRDAI (Registration and Operations of Branch Offices of Foreign Reinsurers other than Lloyd s) (First Amendment) Regulations, 2016, dated 28 January 2016, states that every Indian insurer shall obtain the best terms for their facultative and treaty surpluses from Indian reinsurers, fulfilling certain criteria as laid down by the said regulation. These best terms of participation shall then be offered by Indian insurers in the following order of preference: 1. Indian re-insurer(s) having a minimum credit rating as under regulation 4(a) of the above guidelines 2. To the Indian re-insurers that have a granted certificate of registration as per 4(b) of the regulations 3. To the branch office of foreign reinsurers set up in special economic zones, this is only after reinsurers of (a) and (b) have been covered. 4. If there is any balance remaining, then this will be offered to Indian insurers and other overseas re-insurers. However, these regulations are not being complied with by all insurers. If they fail to, they are likely to face regulatory action. 1 https://www.irdai.gov.in/admincms/cms/whatsnew_layout. aspx?page=pageno3443&flag=1 7 PwC PwC s Insurance Insights
Re: Compliance of Motor Third Party Obligations Ref: IRDA/NL/CIR/MOTP/065/04/2018 2 Date of issue: 26 April 2018 Applicability: To all CEOs/CMDs of General Insurance Companies With reference to the IRDAI regulations dated 2 June 2015 regarding compliance of motor third party obligations, insurers who have been licensed to underwrite the direct motor insurance business in India are required to use the gross direct premium figures as published on the IRDAI website for computing motor third party obligations. 2 https://www.irdai.gov.in/admincms/cms/whatsnew_layout.aspx?page=pageno3463&flag=1 8 PwC PwC s Insurance Insights
Vivek Iyer Partner vivek.iyer@pwc.com Mobile: +91 9167745318 Joydeep K Roy Partner joydeep.k.roy@pwc.com Mobile: +91 9821611173 Dnyanesh Pandit Director dnyanesh.pandit@pwc.com Mobile: +91 9819446928 Saigeeta Bhargava Associate Director saigeeta.bhargava@pwc.com Mobile: +91 9560518833 Yugal Mehta Manager yugal.mehta@pwc.com Mobile: +91 9970163293 Varsha Mehrotra Consultant varsha.mehrotra@pwc.com Mobile: +91 83890640211 Prateek Kannan Consultant prateek.kannan@pwc.com Mobile: +91 9840753109 9 PwC PwC s Insurance Insights
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