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“Life Insurance, as a part of the total household savings in India, has stabilised after facing a decline in 2010
owing to regulatory reforms. A comparison with similar statistics for select developed countries, like the
USA, the UK and France, indicate similar proportions of household savings invested in insurance.”
The following chart represents trend in the proportion and growth of life insurance savings as part of the household sector financial
assets in India. The analysis spans over the past 15 years since the privatisation of insurance sector in India. The trend line chart
represents the year on year growth in life insurance savings; and the column graph represents life insurance as part of the total
household financial assets.
Source: RBI statistics
Life insurance accounts for 19.0% of the total household
financial assets in India of INR12,356 billion for FY2014-15. The
Banking sector holds the largest share of these assets with
46.9%, while pension funds contribute 16.3%. The proportion of
life insurance peaked in FY2009-10 with 26%, as a result of
rapid growth in preceding years and better penetration with
opening up of the sector to private insurers, followed by a
relative decline in the following years. Similarly, year-on-year
growth in life insurance savings reached a peak in FY2009-10
followed by a sharp decline and a rise again in the past few
years. During the period of global economic crisis after FY2007-
08, life insurance witnessed a rise in its share from 15.0% in
2006-07 to 22.0% in FY2007-08, while savings in banking sector
dipped from 56.1% to 50.4%.
The following graphs show a comparison of life insurance and pension funds, as a component of household financial assets of
India with developed economies like the USA, the UK and France. Growth is calculated as compounded annual growth rate
(CAGR).
Source: Global Investment Research Report, Goldman Sachs Notes: 2004 has been used as the base year for 2006; latest available data for the USA is as of 2013. *Years on the x-axis represent calendar years, except for India where year represents financial year (where for example, 2013 represents FY2013-14).
The graphs indicate that the USA, France and India currently
exhibit a similar proportion of insurance (life insurance and
pension fund investments) out of the total household financial
assets, i.e. around 35%-40%, while the UK holds a relatively
higher proportion of insurance with 61.3%. Analysis of growth in
insurance savings indicates that France, the USA and India
have followed a similar trend over the period considered, with
India showing more volatility compared to others. It is
noteworthy that even though the proportion of household
financial assets invested in insurance funds is similar in India to
these countries, the overall insurance penetration remains low in
Source: Towers Watson analysis of company disclosures and press releases
Notes: 1. As reported in the media or calculated as implied valuation divided by most recent available EV disclosure 2. Outstanding # shares is the total number of shares of the insurance company from 30 September 2015 public disclosures
Market update “Following increase in the FDI limit in the Indian insurance sector to 49%, many foreign insurers have come
further along in the process of increasing their stake in their existing joint ventures. However, the
requirement of fulfilment of the recently released ‘management control’ guidelines and negotiations between
partners to reach a mutually agreeable valuation has delayed the process for some insurers.”
Stake transfers to foreign partners
After nearly eight months since the passage of the Insurance
Laws (Amendment) Act, which raised the FDI limit in the
insurance sector to 49%, only one foreign insurer has so far
received regulatory approval for a stake hike in its life
insurance joint venture. Meanwhile, most life insurers have
expressed public interest in increasing their respective foreign
partners’ share in the joint venture and are at varying stages of
this process. The completion of the stake transfer for some of
these life insurers has been held up due to clarity sought
regarding management control from the regulator.
Bharti AXA Life, which was previously asked by the IRDAI to
rework its shareholding pattern in accordance with the
clarification on management control guidelines released by the
regulator, has now received the regulator’s nod and has
announced that AXA shall increase its stake from 26% to 49%
in the joint venture. HDFC Life has applied to the Foreign
Investment Promotion Board (FIPB) for approval for Standard
Life’s stake hike to 35% in the joint venture and is also working
to meet the regulatory guidelines. The details of this
transaction were covered in our India Market Life Insurance
Update, Edition 60. Following this transaction, the HDFC Life
has indicated intentions of launching an Initial Public Offering
(IPO) by mid-2016.
Aegon Life has obtained approval from the FIPB to increase
the stake of Aegon to 49% in the joint venture. This proposal
had previously been deferred by the FIPB. Aviva Life has
obtained approval from Competition Commission of India
(CCI) to increase the stake of its foreign partner Aviva
from 26% to 49%.
Media reports suggest that Nippon Life is in an advanced
stage of discussions to raise its stake from 26% to 49% in
Reliance Life. The deal is subject to regulatory approvals and
is expected to be completed within the current financial year.
The joint venture will be subsequently renamed to Reliance
Nippon Life Insurance. Sun Life Financial has stated that it
will increase its stake from 26% to 49% in its joint venture -
Birla Sun Life. The transaction is expected to close by the
end of the current financial year. SBI Life has also begun the
process to increase the stake of BNP Paribas from 26% to
36% and the joint venture partners expect to reach an
agreement on the valuation of SBI Life over the next couple of
months. Star Union Dai-ichi Life and DHFL Pramerica Life
are amongst the other insurers who have reportedly made
progress in their joint venture negotiations and are close to
increasing the shareholding of their respective foreign
partners- Dai-ichi Life and Prudential Financial Inc. to 44% and
49%, respectively. In addition to this, Max India is reportedly
in talks with four private equity firms for sale of a 22% stake in
Max Life such that the combined stake held by the private
equity investors and the existing foreign partner Mitsui
Sumitomo in the joint venture would increase to nearly 49%.
The chart presented below summarises the current state-of-
play for various life insurers in their respective stake transfer
process at the time of releasing this newsletter, based on
information available in the public domain. Key transaction
Growth in individual unweighted new business premium income by channel during April to
September 2015:
New business momentum driven by bank-led distribution models.
An analysis of public disclosures by life insurers show an
overall decline in the individual new business premium
collections for April to September 2015 compared to the same
period in the previous year. The individual unweighted new
business premium collection reduced by 10.1% in the industry,
a fall which can largely be attributed to the sluggish
performance of the agency channel, which witnessed a
decline in new business collections of 14.4%. This decline in
the agency channel contrasts with a growth of 3.6% for
bancassurance and a marginal 0.7% growth for other
channels.
The following chart sets out relative contribution of each
agency, bancassurance and other channels to overall growth
in individual unweighted new business. Masked within the
overall decline in individual unweighted new business
collections for the industry is experience of the private players
which combined witnessed a grown of 16.2% from first half of
FY2014-15 and that of LIC which witnessed a fall of 23.5%
year-on-year.
The growth of 16.2% for private players was largely driven by
growth in new business from bancassurance of 12.7% with
growth in agency remaining relatively flat for private players as
a whole. The relative channel performance is evident as 7 out
of top 10 private insurers that have registered a year on year
growth in individual new business premium are either bank-
promoted insurers or have significant bancassurance tie-ups,
whilst the three insurers that experienced fall in the
unweighted individual new business premium income are all
agency led. This is represented in the chart through relative
contribution of each channel in the overall growth for each
company.
Amongst the top 10 private insurers, Kotak Life and SBI Life
witnessed the highest growth in unweighted individual new
business premium income for the half year. Whilst the growth
for SBI Life was largely bancassurance driven, Kotak Life
demonstrated a balanced performance of its bank and agency
channels. The only other insurer with relatively balanced
performance across these two channels was Max Life with all
other insurers witnessing starkly different outcomes across
channels. This is represented in the chart through blue/black
markers showing the absolute year-on-year growth in
bancassurance/agency channel for first half of FY2015-16.
Birla Sun Life, which saw its bank-distribution partner,
Citibank move to Tata AIA earlier in the year is the only
private life insurer among those represented under the study
to register a decline in its individual new business sourced
through bancassurance channel.
Source: Towers Watson analysis using public disclosures data.
*Figures for Aviva Life, Sahara Life, Bharti AXA Life and Canara HSBC OBC Life are not available as at September 2015 and hence have been excluded from the
Products update “There was an increased focus on unit-linked products with nearly two-fifths of the new product launches
during September to November 2015 being linked products. Insurers are also looking to launch online
insurance plans – covering both savings and protection products - to strengthen their presence in the digital
space.”
There has been a renewed interest in unit-linked products,
driven by a positive economic outlook, leading to a 20% to
30% annualised gains in unit-linked funds over the past three
years, as well as a resurgence in sales of unit-linked policies.
We have observed a relatively higher number of unit-linked
product launches during the current reporting period as
compared to the previous quarter.
Meanwhile Exide Life is reportedly planning to re-align its
strategy to shift its new business mix towards a greater
proportion of unit-linked products from its current portfolio
dominated by non-linked products. SBI Life however has
stated that it intends to maintain a business mix as
diversified as possible.
To improve policy persistency, PNB MetLife has launched a
reinstatement drive which would enable the customers to
avail waiver on reinstatement charges.
Bajaj Allianz Life has also announced a special revival
campaign to help policyholders renew their lapsed traditional
life insurance policies. As per media reports, under the
campaign, customers would be given a 50% waiver on the
interest amount payable since the policies lapsed.
Select company-wise new product launches during the
period September to November 2015 are summarised in the
table below:
Company name Product name Product description
Aviva Life Aviva Dhan Vriddhi Plus Non-linked; participating limited pay endowment plan. It provides flexibility to choose the premium payment term from 5, 7 and 11 years. It offers a maturity benefit of 100% of premiums paid along with accrued bonuses.
Bharti AXA Life Bharti AXA Life Child Advantage Non-linked; participating endowment child plan offering two benefit pay-out options. It also provides waiver of future premiums on death.
Birla Sun Life BSLI Wealth Aspire Plan Unit-linked; non-participating endowment plan. Loyalty additions are accrued at the end of every fifth policy year, starting from the fifth or tenth policy year depending upon the amount of premium paid.
DHFL Pramerica Life DHFL Pramerica e-Save Plan Online non-linked; non-participating endowment plan offering annual guaranteed additions based on the amount of annualised premium.
DHFL Pramerica Rakshak Gold Non-linked; non-participating limited pay endowment plan offering annual guaranteed additions at the end of policy year that will increase after every three policy years.
Edelweiss Tokio Life Edelweiss Tokio Life Dhan Labh Non-linked; non-participating limited pay endowment plan offering assured additions every year starting from the 13th policy year.
Future Generali Life Future Generali Jan Suraksha Non-linked; non-participating single premium term insurance.
Future Generali Flexi Online Term Plan
Online non-linked; non-participating term insurance that offers flexibility to choose the form of death benefit from three options – lump sum benefit, monthly pay-out or a combination of lump sum benefit and monthly pay-out.
HDFC Life HDFC Life Click2Retire Online unit-linked; non-participating pension product offering a guaranteed vesting benefit. It has no entry/exit and policy administration charges associated. It provides single and limited pay options.
HDFC Life Assured Pension Plan Unit-linked; non-participating pension product with limited pay and single pay option available. It provides loyalty additions every alternate year after 11th policy year.
IDBI Federal Life IDBI Federal Wealthsurance Future Star Insurance Plan
Unit-linked; non-participating child plan. It offers up to nine fund options to invest in. It offers waiver of future premiums on death as well as guaranteed loyalty additions at specified policy intervals.
Kotak Life Kotak Premier Pension Plan Non-linked; participating pension plan providing guaranteed additions in the first five policy years and bonuses from the sixth policy year. It also offers a minimum guaranteed benefit and additional protection through riders.
Max Life Max Life Platinum Wealth Plan Unit-linked; non-participating endowment assurance plan with a choice of five funds to invest in and unlimited free switches in a policy year. It offers guaranteed loyalty additions and additional units at the end of every five years starting from the tenth policy year. It also provides an option of dynamic fund allocation where a large proportion of premium is invested in equity oriented funds.
Max Life Monthly Income Advantage Plan
Non-linked; participating limited pay anticipated endowment plan offering guaranteed monthly income for a period of 10 years after the premium paying term. It also offers optional term and accidental death and dismemberment riders.
SBI Life SBI Life CSC Saral Sanchay Non-linked; non-participating variable insurance plan. It offers guaranteed minimum interest rate of 1% per annum and also provides flexibility to choose premium amount with a minimum annual premium of INR 2,400. A top-up premium option is also available which can be used to increase the sum assured.
Star Union Dai-ichi Life SUD Life Aayushmaan Non-linked; participating endowment plan providing guaranteed additions at end of each policy year for the first five policy years. It offers the options of accidental death and total and permanent disability benefit and family income benefit riders.
SUD Life Group Retirement Benefit Plan
Unit-linked, non-participating group insurance plan for gratuity and leave encashment liabilities of employers. It provides an option to choose from four investment funds.
An archive of previously published India Market Life Insurance Updates is available at: www.towerswatson.com/en-IN/Insights/Newsletters/Asia-Pacific/india-market-life-insurance
Contact details
Towers Watson's Risk Consulting team covers the length and breadth of India with associates based in Mumbai and Gurgaon.
The India Market Life Insurance Update has been prepared by
Towers Watson for general information purposes only and does not constitute professional advice. The information, opinions and projections contained in this Newsletter are derived from various sources and have not been independently verified by Towers Watson. If you require professional advice or require any further information please contact any of the above named individuals.
Research and editorial team Vivek Jalan Kunj Behari Maheshwari Abhilasha Goyal Ashik Salecha Esha Goel Sanya Gupta
Further Information For further information please contact your Towers Watson Consultant or:
Vivek Jalan
Director – Risk Consulting and Software Towers Watson India +91 124 432 2816 [email protected]
Director – Risk Consulting Towers Watson India +91 124 432 2821 [email protected]
Towers Watson's Risk Consulting team covers the length and breadth of India with associates based in Mumbai and Gurgaon.
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