Media meet on Looking ahead in Life Insurance 19 SEPTEMBER 2013 MUMBAI

Overview of Indian Life Insurance Industry 1 The largest retail financial service business with around 36 crore in-force policies [Largest in the world] 2 High capital intensive industry – `25,519 crore deployed 3 `6,046 crore FDI by international joint venture partners 4 AUM of Life Insurers is `17.41 lakh crore 5 Major contributor to every 5 Year Plan 6 >10,000 offices across the country – 72% in semi-urban & rural areas 7 Population of 200/203 countries in the world is less than the total number of Indian life insurance customers *As on 31st March 2013 Looking ahead in Life insurance

Indian life insurance industry has grown over the years… FY12-13 (Provisional) June 2013 (Provisional) Parameters FY99-00 FY08-09 FY10-11 No. of Players 1 22 23 24 24 Capital (`Cr) 5 18,253 23,662 25,519 34,074 No. of Branches 2,048 11,815 11,546 10,253 10,587 Employees (in Lakh) 1.23 2.85 2.42 2.45 2.41 Individual Agents (in Lakh) 7.14 29.38 26.39 21.25 21.31 Source: IRDA Annual Report &Council MIS Report Looking ahead in Life insurance

…by touching the lives of people across the country Sr. No. State No. of Branches* 1 Maharasthra 1149 2 Uttar Pradesh 1123 3 Andhra Pradesh 1056 4 Tamil Nadu 875 5 Gujarat 724 6 Kerala 689 7 West Bengal 687 8 Karnataka 628 9 Rajasthan 575 10 Madhya Pradesh 528 11 Punjab 516 12 Bihar 398 13 Haryana 383 14 Orissa 345 15 Delhi 267 16 Assam 242 17 Jharkhand 238 18 Chhattisgarh 162 19 Uttrakhand 141 20 Himachal Pradesh 126 21 Jammu & Kashmir 97 22 Goa 50 23 Chandigarh 37 24 Tripura 30 25 Meghalaya 26 Puducherry 27 Arunachal Pradesh 28 Sikkim 29 Nagaland Manipur 31 Mizoram 32 Andaman & Nicobar Islands 33 Dadra & Nagra Haveli 34 Daman & Diu 35 Lakshadweep Total 11,167 10,587 No. of branches as on 30th June 2013 1 2 3 4 5 6 7 8 9 10 Top 10 states in terms of no. of branches *As on 31st March 2012 Looking ahead in Life insurance

The industry has expanded rural footprint for inclusive growth Companies are statutorily required to do rural business and cover lives from social sector - rural, un-organized and socially underprivileged from their first year of operation Companies have to mandatorily sell 18% of new policies in rural areas (1.14 crore policies in 2012-13) Cover 25,000 lives in social sector every year (1.84 crore policies in 2012-13) 72% of the total 10,253 branches of insurance companies are in semi-urban & rural areas No such obligations for other products under financial services Source: IRDA, Life Insurance Council, Data for FY 2012-13 Looking ahead in Life insurance

Total Revenue of Life Insurers Life Insurance industry has witnessed a decline in total revenue but there’s been a healthy increase in renewal premium ` Crore Total Revenue of Life Insurers 2,91,639 2,87,071 2,87,189 Looking ahead in Life insurance

And has witnessed a continuous growth of life insurance customer base Crore [In –force Policies] Source: IRDA Journal, Data 2012-13 (provisional) Looking ahead in Life insurance

Assets Under Management (AUM) of life insurers has also witnessed steady growth Category of Investments 2000-01 ` Cr. (%) 2011-12 ` Cr . (%) 2012-13 ` Cr. (%) Traditional Products Central Govt. Securities 47,513 (24.48%) 4,68,082 (38.64%) 5,11,248 (36.55%) State Govt. Securities 52,524 (27.07%) 2,14,515 (17.71%) 2,66,003 (19.02%) Infrastructure Investments 24,887 (12.80%) 97,320 (8.03%) 1,16,645 (8.34%) Approved Investments 50,502 (26.03%) 3,85,107 (31.79%) 4,45,611 (31.86%) Other than Approved Investments 18,584 (9.58%) 46,262 (3.82%) 59,161 (4.23%) ULIP - - 3,46,340 (93.61%) 3,25,281 (94.97%) Other Investments 23,632 (6.39%) 17,226 (5.03%) Total 1,94,010 (100%) 15,81,259 (100%) 17,41,175 (100%) Investments have been targeted towards established funds that helped in infrastructure growth of the country Source: IRDA Annual Report Looking ahead in Life Insurance

Life Insurance industry has continued to contribute significantly towards the economic growth of the country ` Crore 180 750 3,500 16,000 1,32,000 7,25,000 1956-57 to 1960-61 1966-67 to 1970-71 1976-77 to 1980-81 1986-87 to 1990-91 1996-97 to 2000-01 2006-07 to 2010-11 Life insurance sector has provided long-term funds for infrastructure development through five-year plan Looking ahead in Life insurance

% share of Life Insurance within net household Life Insurance - one of the most preferred financial savings instrument Details FY09-10 FY10-11 FY11-12 Total Savings as a % of GDP 33.7 34.0 30.8 Of which, Net Household Financial Savings as % of Total Savings 35.6 30.6 26.0 Out of Net Household Financial Savings Fixed Deposits 51.7 59.4 64.1 Life Insurance 26.2 22.3 23.1 Provident & Pension Funds 13.1 14.0 15.6 Shares & Mutual Funds 4.5 0.2 -0.7 Others 4.1 -2.1 Total 100 % share of Life Insurance within net household * Life Insurance Council projections Looking ahead in Life Insurance

Indian Life Insurance market has huge growth potential when compared with other countries Size of the Market (US $ Billion) Life Insurance Penetration (Premium/GDP) – % Life Insurance Density (Premium per capita – US $) Asia: 958 World: 2,621 Asia: 4.1% World: 3.7% Asia: 230 World: 373 Note: * FY13 in case of India; Source: Swiss Re ‘World Insurance in 2012’ By FY 2020 life insurance penetration expected to grow to 5% of GDP; industry size expected to touch 700 billion US $. Council is of the view that the industry size has the potential to touch 1 Trillion US $ by 2020. Looking ahead in Life Insurance

Indian demography is favourable to the growth of Life Insurance Life Expectancy Insurable Population Insurable population is expected to grow to 75cr. by FY 2020 Looking ahead in Life Insurance

The next phase of the life insurance sector

Customer Centricity Insurance Awareness Policy Issuance Service to Customers Claim Settlement Looking ahead in Life Insurance

Ombudsman – A grievance redressal mechanism established There are 11 ombudsman Centre's in India which provides quick disposal of the grievances of the policy-holders at nominal cost. Policy document should clearly mention inter-alia the grievance redressal mechanism, name and address of grievance officer, ombudsman to whom complaint can be registered. Year Total No. of Complaints Complaints disposed % of disposal Complaints pending % of pending 2011-12 28,361 21,185 75% 7176 25% 2012-13 18,557 14,673 79% 3884 21% Number of complaints are high and they have gone up. The Grievance Redressal efforts have brought the pending complaints down marginally. Source: IRDA Annual Report Looking ahead in Life Insurance

Customer Grievance Redressal through Integrated Grievance Management System (IGMS) has been successful Year No. of In-force policies No. of Grievances reported No. of Grievances attended No. of Grievances pending 2011-12 33.52 Cr. 3,09,613 3,08,331 (99.59%) 1282 (0.41%) 2012-13 35.87 Cr. 3,42,294 3,41,070 (99.64%) 1224 (0.36%) Source: IRDA Annual Report Looking ahead in Life Insurance

Insurers have also contributed towards the agenda of customer centricity

Total benefits* paid to customers by life insurers ` Crore Total Benefits Paid (` Cr.) * Total Benefits paid include Death claim, Maturity claim & Surrender payouts. Source: IRDA Annual Report Looking ahead in Life Insurance

Consistent improvement in Death Claims Settled by Life Insurers – By No. of Policies Claims Paid 96% 97% Claims Pending 2.1% 1.9% 2% Claims Repudiated 1.8% 1.4% 1% Looking ahead in Life Insurance

Death Claims Settled by Life Insurers – By Amount Claims Paid Claims Pending 92.9% 93.1% 98% 3.3% 2.8% 1% Claims Repudiated 3.8% 4.1% 1% Looking ahead in Life Insurance

Customer Centric initiatives taken by life insurers 1 Customer Education – Audio visuals, contributory articles, newsletters, consumer awareness workshops, direct service for customers 2 Need Based – Pre-Issuance verification, Post-Issuance Welcome calling, Communication calendar for ongoing communication on policy related information 3 Providing Clear Information – Policy information portal, Benefit illustration, Key feature document, Simplified Policy Kit 4 Grievance redressal – Defined service timelines, self-service modes to customers for ease and convenience, which include its website, interactive voice response system (IVRS) in multiple languages, website for mobile phones, SMS-based services 5 Claims Processing – Claim guarantee, 24x7 Claim Care centre, dedicated claims officer, interest payment on delay in claims payment Looking ahead in Life Insurance

Steps taken to tackle mis-selling Regulatory Initiatives Standard Proposal Form has been made mandatory for each individual life proposed w.e.f. 1st April 2014 Before making any recommendation, product suitability matrix to be measured Benefit illustration compulsory for all products Life Insurers’ Initiatives The regulator has already done some work to reduce the incidence of mis-selling. Setting up of a Policyholder Protection Committee as a mandatory Board subcommittee was the first step in this direction. The Standard Proposal Form, aimed at institutionalising the need based sales process is another step in this direction. 1. Brings in uniformity in the industry and will ensure transparency for policyholders 2. Enables policyholder better information on their policy accounts and funds chosen 3. Besides, supporting insurance sector’s contribution to infrastructure it also helps insurers get longer term investment avenues for the long term liabilities assumed by them 4. Ensuring stronger controls on risk management systems and processes of the insurers Welcome calling before issuing the policy Mystery shopping to check selling practices Regular customer satisfaction survey on various aspects of pre and post sales processes Looking ahead in Life Insurance

Key measures that will drive growth in the Life Insurance industry

Multiple actions will bring back growth in the life insurance industry Pioneers in the globe to grant license to e-repositories 5 Repositories authorized to open e-Insurance Accounts. Increase in FDI in Insurance sector to 49% Enhancement of dollar inflows in the country immediately and in future on a recurring basis Arrival of domain capital in the area of products, technology and risk management techniques to ensure steady growth of the industry Flowing of up to 10 billion US $ in the country Distribution related initiatives Expand distribution reach – Insurers are poised to increase number of agents to more than 3 million in the next 5 years Utilize CSCs to expand reach - One lakh CSCs each serving a cluster of 6-7 villages, covering ~6.5 lakh villages across India Improve market conduct and raise trust levels with customer Awareness building initiatives Increase grievance cells and customer contact centres E-insurance accounts - This account will help safeguard policyholders to hold insurance policy documents in electronic format and also provide access to the insurance portfolio online. This will help Insurance Companies to open more outlets/offices in rural areas. Looking ahead in Life Insurance

Life Insurance industry expected to record a CAGR of 12-15% over the next 5 years

Projections: The net Household Financial savings could reach around 30% in the next 3 years from the present level of 23.1% (FY 11-12); Life Insurance being the second most preferred financial instrument will benefit from this 1 2 The Penetration level of Life insurance industry is expected to grow from 3.2% to 5% by year 2020 3 Expected CAGR of Life Insurance industry will be 12-15% in the next 3-5 years Looking ahead in Life Insurance

Life Insurance sector will continue to contribute to nation building Life Insurance employment potential till FY 2020 – 5 Lakh employees 1 2 Life insurance industry contribution to Infrastructure projects – Rs. 3.5 Lakh cr. by FY 2020 3 Increase in FDI up to 10 billion US $ will increase customer coverage in rural and semi urban areas from 72% to 80% and fuel employment growth in the country and contribute to increase in GDP of the country. Looking ahead in Life Insurance

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